RESPA's "Thing of Value"

For most businesses, it's who you know that counts. Relationships are the artery system that delivers the lifeblood of a business. However, RESPA places serious restrictions on how relationships can be used in the mortgage industry.

RESPA subjects every business relationship to suspicious scrutiny. Referrals, and the transfer of a "thing of value" are strictly controlled under the act and regulation. RESPA's structure is based on the assumption that relationships conceal benefits to the businesses that are hidden from but paid for by the consumer.

One sales technique becoming popular involves a real estate office offering space to loan officers, or a lender offering space to a real estate broker. The idea is that the real estate professional and the loan professional are right there - for the convenience of the customer.

The problem with this type of arrangement is that RESPA and Regulation X assume that this is not a convenience, but that the customer is at the mercy of the two settlement services providers.

It is a referral. When space is provided at no cost, the space becomes a "thing of value" and the relationship clearly violates RESPA. If the space is paid for at fair market value, the situation may pass the RESPA test, but each one should be closely scrutinized.

Home page "hot keys" are raising a similar question: Does the bank's presence on a realtor's homepage with a hot key to learn about the bank's loan products violate RESPA? Be cautious before setting up such a relationship. This is clearly a referral and may also be construed as a thing of value.

Copyright © 1997 Compliance Action. Originally appeared in Compliance Action, Vol. 2, No. 1, 1/97