Beware Of Illegal Mortgage Referral Fees

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To protect consumers from illegal mortgage referral fees, The Real Estate Settlement Procedures Act (RESPA) was enacted by Congress. They felt that protection was needed to prevent unnecessarily high settlement charges caused by certain abusive practices that have developed in some areas of the country. Most professionals in the settlement business do not engage in these practices and provide good service.


It is illegal under the Real Estate Settlement Procedures Act for anyone to receive a fee or pay a kickback or anything of value because they agree to refer settlement service business to a particular organization or person. For example, your mortgage lender may not pay your real estate broker two-hundred and fifty dollars for referring you to the lender. If a person has not actually performed settlement services for a fee, it is also illegal for anyone to accept a fee or part of a fee for services. For example, a lender may not add to a third party's fee, such as an appraisal fee, and keep the difference.

The Real Estate Settlement Procedures Act does not prevent mortgage brokers, title companies, attorneys, appraisers, closing/settlement agents and others, who actually perform a service in connection with the settlement of the mortgage loan, from being paid for the reasonable value of their work.

It is a crime for someone to receive or pay a illegal referral fee. The penalty can be imprisonment, a fine or both. If a participant in your settlement appears to be taking a fee without having done any work, you should advise that person or company of the RESPA referral fee prohibitions. By bringing a private lawsuit, you may be entitled to recover three times the amount of the charge for any settlement service. If you are successful, the court may also award you attorney's fees and your court costs.