THE REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA) (1974)
The Real Estate Settlement Procedures Act (RESPA) was passed in 1974 to eliminate abusive practices in the real estate industry, such as kickbacks and referral fees.
This Federal Law currently reads as follows:
(a) Business Referrals
"No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise," [for the referral of real estate business]
(b) Splitting Charges
"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 real estate settlement service … other than for services actually performed."
The Penalties for Violations are as follows:
(1) Any person or persons who violate the provisions of this section shall be fined not more than $10,000 or imprisoned for not more than one year, or both.
(2) Any person or persons who violate the prohibitions or limitations of this section shall be … liable in an amount equal to three times the amount of any charge paid ….
II.AMENDMENT TO RESPA (1983)
In 1983 RESPA was amended to allow for the sharing of fees between a title insurance company and a third party.
However, in order to share fees, certain “safe harbor” requirements must be fulfilled under RESPA, including proper disclosure, lack of coercion, and permissible compensation.
In addition to the restrictions and requirements set forth in RESPA, the Federal Department of Housing and Urban Development, in response to its concerns that some affiliated arrangements, although compliant with the RESPA amendment, were nonetheless in violation of the prohibitions against referral fees, established certain additional applicable criteria, including proper capitalization, management, and the provision of substantial services.
III.RESPA TODAY
RESPA is currently undergoing numerous changes, many of which apply to Settlement Service Providers and Disclosures. In addition, numerous Federal judicial decisions have further defined and clarified the Safe Harbor provisions of RESPA applicable to the creation and maintenance of an affiliated title insurance company.
Title & Escrow Affiliates, LLC has the knowledge, qualifications, and experience to assist you with the proper creation and maintenance of an affiliated title insurance company.