What is RESPA?

by | Oct 20, 2017 | Legal Tips

In the real estate industry people seem to throw RESPA around whenever there is a disagreement on how a closing should be handled, when often RESPA is not related to the matter at all.  This week we will begin an examination of RESPA and what it means to the real estate agent.

RESPA is the acronym for the Real Estate Settlement Procedures Act. This federal statute was passed in 1974 and implemented in 1975. RESPA covers more than just illegal kickbacks. The statute also governs mortgage documentation and disclosure as well as loan escrows and other items.

Section 8 of RESPA is the most  familiar part of the statute to real estate agents. This section covers illegal kickbacks and payments for referrals.  Section 8 was designed to protect consumers from artificially inflated closing costs that are associated with the payment of referrals.  RESPA does not just prohibit someone from paying cash for referring business, it also prohibits transfers of money or things of value through marketing schemes.

RESPA(8)(a) states a simple concept “a person or entity may not give, accept, or transfer a fee, kickback, payment, commission, gift, tangible item, special privilege, or any other thing of value to any other person in exchange for a referral of business in a real estate settlement transaction.”

Originally, the Department of Housing and Urban Development was charged with enforcing RESPA violations. In 2010 as a result of the economic crisis, the Dodd Frank Wall Street Reform and Consumer Protection Act was enacted which created the Consumer Finance Protection Bureau (CFPB). The CFPB was granted rule making authority as well as the authority to supervise and enforce compliance with RESPA.

THANK YOU REAL ESTATE AGENTS! Together we raised over $17,000 for the South Carolina Military Family Care Association. The October 5 charity event at Spirit Communications Park was a huge success. The money raised will go a long way to help military families here in South Carolina. 


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