The term RESPA violation is thrown out often in the real estate world, yet most individuals have no idea what it really refers to. Real Estate Brokerages are not allowed to receive undisclosed illegal kickbacks from related service providers within the industry. For example, a RE Brokerage should not receive a kickback from a local Title Company for repeatedly sending business their way. The same holds true for loan officers. A loan officer can not pay a fee to a brokerage for closed mortgage transactions.
The Federal Government takes RESPA violations seriously because they are in place to protect the public and encourage free competition. RE Brokerages are in a position of trust with their clients. Clients take the suggestions of their brokers very seriously. As a result, RESPA wants to prohibit a brokerage from profiting at the expense of this trust w/out full disclosure. Look at it this way, if a broker is sending a buyer to a loan officer in hopes of receiving a kickback later, is the broker really serving the best interest of his/her client?
NAR repeatedly stresses to brokerages to keep up to date with changing RESPA guidelines. Despite this, new stories pop up regarding serious RESPA violations and the involvement of RE Brokerages month after month. In the real estate world, the relationships that are closely monitored are between Title Companies and RE Brokerages and Lenders and RE Brokerages. These two relationships are littered with opportunities for abuse by both parties.