C O A L I T I O N Corner An 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

C O A L I T I O N Corner 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

C O A L I T I O N Corner 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 Acronym for “Real Estate Settlement Procedures Act” Federal consumer protection statute Originally enacted in 1974 (updated since) Enforced by the Department of Housing and Urban Development (HUD)

C O A L I T I O N Corner 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:

C O A L I T I O N Corner 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

C O A L I T I O N Corner 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

C O A L I T I O N Corner 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

C O A L I T I O N Corner 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

C O A L I T I O N Corner 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.

C O A L I T I O N Corner Other Resources… HUD-dedicated RESPA web site: –