To protect consumers from illegal mortgage referral fees, The Real Estate Settlement Procedures Act (RESPA) was enacted by Congress. They felt that consumers needed protection from unnecessarily high settlement charges caused by
certain abusive practices that have developed in some areas of the country. Most professionals in the settlement business provide good service and do not engage in these practices.
It is illegal under RESPA for anyone to pay or receive a fee, kickback or anything of value because they agree to refer settlement service business to a particular person or organization. For
example, your mortgage lender may not pay your real estate broker $250 for referring you to the lender. It is also illegal for anyone to accept a fee or part of a fee for services if that
person has not actually performed settlement services for the fee. For example, a lender may not add to a third party's fee, such as an appraisal fee, and keep the difference.
RESPA does not prevent title companies, mortgage brokers, appraisers, attorneys, settlement/closing agents and others, who actually perform a service in connection with the mortgage loan or the
settlement, from being paid for the reasonable value of their work.
It is a crime for someone to pay or receive an illegal referral fee. The penalty can be a fine, imprisonment 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. You may be entitled to recover three times the amount of the charge for any settlement
service by bringing a private lawsuit. If you are successful, the court may also award you court costs and your attorney's fees.