RESPA Section 8 Violations Emphasized in Recent FDIC Report

The FDIC recently published its 2018 Consumer Compliance Supervisory Highlights, detailing common violations of consumer protection laws. The full report can be accessed here. Among the issues identified in recent FDIC examinations were RESPA Section 8 violations related to kickbacks and unearned fees for the referral of settlement business.

RESPA Section 8 prohibits giving or accepting a fee, kickback or thing of value for the referral of settlement business. Additionally, giving or accepting any portion, split, or percentage of a charge for real estate settlement services, other than for services actually performed, violates RESPA Section 8. Bona fide payments for goods actually furnished and services actually performed are permitted.

The report identified both desk rental and marketing service arrangements that violated RESPA Section 8. While lenders are permitted to enter into agreements for the rental of office space, such agreements must be based on fair market value of the rented space and cannot be used to conceal the payment of illegal referral fees. Paying above-market value for desk rentals or office space may violate RESPA Section 8. Similarly, lenders are permitted to enter into bona fide marketing and advertising agreements, however these arrangements must be tied to actual goods furnished or services performed. Using marketing or advertising agreements to conceal illegal payments for referrals of mortgage business is strictly prohibited by RESPA Section 8.

We advise our clients to use caution when entering into any new desk rental or marketing service agreements and to review existing agreements for compliance with RESPA Section 8. Please contact compliance@docsdirect.com with any questions or comments.