A California savings bank originates a home loan and pays a local title company $200 for directing the borrower to the bank. Which statement correctly describes this payment under RESPA Section 8?
Correct Answer
A) It violates RESPA because Section 8 prohibits paying or receiving fees for referrals of settlement services
RESPA Section 8 (12 U.S.C. §2607) prohibits any person from giving or accepting a fee, kickback, or thing of value in exchange for referring settlement service business. A payment from a lender to a title company solely for directing a borrower to that lender is a textbook referral fee violation, regardless of the amount.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
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