Here are some limitations under RESPA that can be understood a little better by reading below:
Kickbacks and referral fees prohibited -- Generally, the paying or receiving of any fee or thing of value for the referral of business related to the settlement without rendering a service is a RESPA violation. It is key that any payment is in return for a service provided. Settlement services are broadly defined to include more than just the traditional services performed by a lender, mortgage broker or title company, such as origination, processing, or funding a loan. Rendering credit reports, termite inspections, and home inspections are all considered settlement services. RESPA does permit (1) payments pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and brokers; (2) payment of any person of a bona fide salary or compensation or other payments of goods or facilities actually furnished or for services actually performed; (3) an employer’s payment to its own employees for any referral activities; and (4) any payment by a borrower for CLO services, so long as the disclosure set forth by HUD is provided to the borrower (see below). Fees that are not permitted to be paid or received under RESPA are not legalized by disclosure or consent.
Computerized Loan Originations (CLO) -- The new RESPA rule implementing a part of the act was effective on December 2, 1992, and promotes one-stop shopping in homebuying as in the best interest of consumers. These regulations allow real estate firms to legally provide certain real estate settlement services (e.g. rendering of services by a mortgage broker, processing or funding of a federally-related mortgage loan, etc.) or to be affiliated with other real estate settlement service providers. CLOs are computerized systems for delivering residential mortgages loan offerings of one or more lenders to customers at a real estate office. Specific written disclosure to consumers is required with CLOs.
Controlled Business Arrangement (CBA) -- A controlled business arrangement (CBA) is a diversified company created to "package" together related real estate services. In a CBA, a person in a position to refer settlement service business has either an affiliate relationship or ownership interest of over one percent in another business which provides settlement services, and directly or indirectly refers business to that provider. An example of such a person would be a licensed real estate broker who is also part owner of a mortgage lending company. CBAs are permitted under RESPA if no payment is made based on the number of referrals (the referring party may only receive return on the investment). If the controlled-business arrangement exists, the person making the referral must meet the following three conditions in order to comply with RESPA: (1) the person making the referral gives an appropriate Controlled-Business Arrangement Disclosure Statement to each person to whom the referral is made; (2) with certain exceptions, the person to whom the referral is made is not required to use the referred settlement service provider; and (3) the only thing of value received from the arrangement is a return on interest or franchise relationship.
If you feel that your lender or title company violated any of the above, call the Law Office of Andrew Farmer for a free consultation at (865) 428-6737. We have worked with homeowners throughout Sevierville, Pigeon Forge, Gatlinburg, and Knoxville in helping them go after predatory lenders who have violated the law. Let us help you.