(a) Section 8
violation. Any violation of this section is a violation of section
8 of RESPA (12 U.S.C. 2607).
(b) No referral fees. No person shall give and no person shall accept
any fee, kickback or other thing of value pursuant to any agreement
or understanding, oral or otherwise, that business incident to or
part of a settlement service involving a federally related mortgage
loan shall be referred to any person. Any referral of a settlement
service is not a compensable service, except as set forth in section
1024.14(g)(1). A company may not pay any other company or the employees
of any other company for the referral of settlement service business.
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(c) No split of charges except for actual
services performed. No person shall give and no person shall
accept any portion, split, or percentage of any charge made or received
for the rendering of a settlement service in connection with a transaction
involving a federally related mortgage loan other than for services
actually performed. A charge by a person for which no or nominal services
are performed or for which duplicative fees are charged is an unearned
fee and violates this section. The source of the payment does not
determine whether or not a service is compensable. Nor may the prohibitions
of this part be avoided by creating an arrangement wherein the purchaser
of services splits the fee.
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(d) Thing of value. This term is broadly defined in section 3(2)
of RESPA (12 U.S.C. 2602(2)). It includes, without limitation, monies,
things, discounts, salaries, commissions, fees, duplicate payments
of a charge, stock, dividends, distributions of partnership profits,
franchise royalties, credits representing monies that may be paid
at a future date, the opportunity to participate in a money-making
program, retained or increased earnings, increased equity in a parent
or subsidiary entity, special bank deposits or accounts, special or
unusual banking terms, services of all types at special or free rates,
sales or rentals at special prices or rates, lease or rental payments
based in whole or in part on the amount of business referred, trips
and payment of another person’s expenses, or reduction in credit against
an existing obligation. The term “payment” is used throughout sections
1024.14 and 1024.15 as synonymous with the giving or receiving of
any “thing of value” and does not require transfer of money.
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(e) Agreement or understanding. An agreement
or understanding for the referral of business incident to or part
of a settlement service need not be written or verbalized but may
be established by a practice, pattern or course of conduct. When a
thing of value is received repeatedly and is connected in any way
with the volume or value of the business referred, the receipt of
the thing of value is evidence that it is made pursuant to an agreement
or understanding for the referral of business.
(f) Referral.
(1) A referral includes any oral or written
action directed to a person which has the effect of affirmatively
influencing the selection by any person of a provider of a settlement
service or business incident to or part of a settlement service when
such person will pay for such settlement service or business incident
thereto or pay a charge attributable in whole or in part to such settlement
service or business.
(2) A referral
also occurs whenever a person paying for a settlement service or business
incident thereto is required to use (see section 1024.2, “required
use”) a particular provider of a settlement service or business incident
thereto.
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(g) Fees, salaries,
compensation, or other payments.
(1) Section 8 of RESPA permits:
(i) A payment to an attorney at
law for services actually rendered;
(ii) A payment by a title company to its duly appointed agent for
services actually performed in the issuance of a policy of title insurance;
(iii) A payment by a lender to
its duly appointed agent or contractor for services actually performed
in the origination, processing, or funding of a loan;
(iv) A payment to any person of a bona fide salary or compensation or other payment for goods or
facilities actually furnished or for services actually performed;
(v) A payment pursuant to cooperative
brokerage and referral arrangements or agreements between real estate
agents and real estate brokers. (The statutory exemption restated
in this paragraph refers only to fee divisions within real estate
brokerage arrangements when all parties are acting in a real estate
brokerage capacity, and has no applicability to any fee arrangements
between real estate brokers and mortgage brokers or between mortgage
brokers.);
(vi) Normal promotional
and educational activities that are not conditioned on the referral
of business and that do not involve the defraying of expenses that
otherwise would be incurred by persons in a position to refer settlement
services or business incident thereto; or
(vii) An employer’s payment to its own
employees for any referral activities.
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(2) The Bureau may investigate high prices
to see if they are the result of a referral fee or a split of a fee.
If the payment of a thing of value bears no reasonable relationship
to the market value of the goods or services provided, then the excess
is not for services or goods actually performed or provided. These
facts may be used as evidence of a violation of section 8 and may
serve as a basis for a RESPA investigation. High prices standing alone
are not proof of a RESPA violation. The value of a referral (i.e.,
the value of any additional business obtained thereby) is not to be
taken into account in determining whether the payment exceeds the
reasonable value of such goods, facilities or services. The fact that
the transfer of the thing of value does not result in an increase
in any charge made by the person giving the thing of value is irrelevant in
determining whether the act is prohibited.
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(3) Multiple services. When a person
in a position to refer settlement service business, such as an attorney,
mortgage lender, real estate broker or agent, or developer or builder,
receives a payment for providing additional settlement services as
part of a real estate transaction, such payment must be for services
that are actual, necessary and distinct from the primary services
provided by such person. For example, for an attorney of the buyer
or seller to receive compensation as a title agent, the attorney must
perform core title agent services (for which liability arises) separate
from attorney services, including the evaluation of the title search
to determine the insurability of the title, the clearance of underwriting
objections, the actual issuance of the policy or policies on behalf
of the title insurance company, and, where customary, issuance of
the title commitment, and the conducting of the title search and closing.
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(h) Recordkeeping. Any documents provided pursuant to this section shall be retained
for five (5) years from the date of execution.
(i) Appendix B of this part. Illustrations
in Appendix B of this part demonstrate some of the requirements of
this section.
