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An Overview of RESPAAn Overview of RESPA
Coalition Corner:Business training tools for HR staff, real estate licensees and other service professionals in the relocation and real estate industries
© 2005, Employee Relocation Council/Worldwide ERC® Coalition
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Program Objectives
• This program supplements a monthly editorial feature in ERC’s Mobility magazine
• In this segment, users will learn:– What RESPA stands for– Who enforces it– What’s covered – How it impacts real estate professionals and consumers– What the penalties for violations are– When it might not be applicable– Where to find additional information
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What is RESPA?
• Acronym for “Real Estate Settlement Procedures Act”
• Federal consumer protection statute
• Originally enacted in 1974 (updated since)
• Enforced by the Department of Housing and Urban Development (HUD)
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Purposes
• “To help consumers become better shoppers for settlement services” and
• “To eliminate ‘kickbacks’ and referral fees that unnecessarily increase the costs of certain settlement services”
As defined by HUD, its purposes are:
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Key Details
• Requires that borrowers receive disclosures at various times in transaction (detailing costs, outlining lender servicing and escrow account practices and describing business relationships)
• Dictates that mortgage brokers and/or lenders must provide borrowers with:– Special Information Booklet– Good Faith Estimate (GFE) of settlement costs– Mortgage Servicing Disclosure Statement
• Prohibits such practices as:
– Giving or accepting any “thing of value” for referrals of settlement service business
– Giving or accepting any part of a charge for services not actually performed
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Coverage and Scope
• Covers loans secured with mortgage placed on a one-to-four-family residential property
• Includes most purchase loans, assumptions, refinances, property improvement loans, and equity lines of credit
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Violations
• Violations subject to criminal and civil penalties
• Criminal: may be fined up to $10,000 and imprisoned for up to one year
• Civil: may be liable to the person charged an amount equal to three times’ the amount of the charge paid for the service
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• Real estate agents may not be paid (and may not accept) any referral fee from a lender, appraiser, inspector, insurance agent, attorney, or other settlement services provider
• It is completely inappropriate for real estate agents to
request any service provider to pay a referral fee in any transaction covered by RESPA -- acceptance of such fees is a violation
• Regulations not limited to payment of fees – any “thing
of value” given in exchange for referrals is prohibited
Relevance to Real Estate Agents
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When RESPA May Not Apply
• RESPA restrictions do not apply to brokerage commissions splits among real estate agents or to referral fees paid by one real estate agent to another, including a licensed relocation management company
• It is not a violation for a service provider to use a marketing program involving giveaways to all real estate agents in a particular area, trade organization, group, etc.
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Other Resources…
• HUD-dedicated RESPA web site:
– http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm