Q: What activities are prohibited under RESPA Section 8(a)?
A: RESPA Section 8(a) and Regulation X, 12 CFR § 1024.14(b), prohibit giving or accepting a fee, kickback, or thing of value pursuant to an agreement or understanding (oral or otherwise), for referrals of business incident to or part of a settlement service involving a federally related mortgage loan.
1) Fee, kickback, or thing of value. Thing of value is broadly defined in RESPA and Regulation X. 12 USC § 2602(2); 12 CFR § 1024.14(d). Regulation X defines the term to include, 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. “Payment” is used synonymously with the giving or receiving of a “thing of value” in Regulation X, 12 CFR §§ 1024.14 and 1024.15, and does not require the transfer of money. 12 CFR § 1024.14(d).
2) Pursuant to an agreement or understanding, oral or otherwise. An agreement or understanding need not be written or verbalized. It may be established by practice, pattern, or course of conduct. For example, when a thing of value is received repeatedly, and connected in any way with the volume or value of business referred, receipt of the thing of value is evidence that it is made pursuant to an agreement or understanding. 12 CFR § 1024.14(e).
3) For referrals of business. Referrals include oral or written action directed to a person that has the effect of affirmatively influencing a person’s selection of a provider of a settlement service or business incident to or part of a settlement service. That effect can be on any person in connection with the settlement service or business incident thereto who will pay for the service or a charge attributable, in whole or in part, to that service or service provider. 12 CFR § 1024.14(f)(1). Additionally, referrals include requiring the use by the person paying for the service of a particular provider of settlement service-related business. 12 CFR §§ 1024.14(f)(2) and 1024.2(b) (“required use”). Finally, note that prohibited referrals are not limited to those directed to consumers. They might be directed to a number of sources, such as appraisers, real estate agents, title companies and agents, lenders, mortgage brokers, or companies that provide information in connection with settlements, such as credit reports and flood determinations. 12 CFR § 1024.14(b) and (f).
4) Incident to or part of a real estate settlement service involving a federally related mortgage loan. To be a violation, the referral(s) must be directly or indirectly incident to or part of a real estate settlement service involving a federally related mortgage loan. 12 USC § 2602(1); 12 CFR § 1024.2(b). Settlement service is defined broadly as any service provided in connection with a real estate settlement, which includes (but is not limited to) origination of a loan, closing services, title services, title insurance, document preparation, property surveys, inspections and appraisals, the rendering of credit reports and appraisals, and services of attorneys, real estate agents, and mortgage brokers. 12 USC § 2602(3); 12 CFR § 1024.2(b).
Updated Oct. 7, 2020