A California real estate licensee refers a homebuyer to a specific mortgage lender. The lender then pays the licensee a $1,000 referral fee. The licensee discloses the fee to the buyer on an Affiliated Business Arrangement (AfBA) disclosure. Is this arrangement lawful under RESPA?
Correct Answer
C) No, RESPA Section 8 prohibits the payment of referral fees for settlement services regardless of disclosure
RESPA Section 8(a) prohibits giving or receiving any 'thing of value' for referrals of settlement services. An AfBA disclosure allows affiliated businesses to refer to each other, but it does not permit paying referral fees for mere referrals. The referring party must perform actual, substantial services to earn compensation.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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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