Is the Competition Breaking the Law?

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Question:

Does RESPA allow the payment of Cash to a client for a Mortgage Loan Referral? I have always been of the understanding this is not allowed under RESPA, however, there are several competitors in my market area actively engaged in paying referral bonuses and I would like to know if I'm correct or if they are acting unlawfully.

Answer:

Based on the brief description that you provided, it would appear to present issues under Section 8 of RESPA. The payment of fees to anyone when no settlement services are performed in conjunction with a mortgage transaction covered under RESPA are not legal.

First published on BankersOnline.com 9/19/05