Tucson Association of REALTORS® 2013 RESPA Roundtable Q&A
1. Can an appraisal company give vouchers to mortgage lenders for required continuing education classes for each appraisal that is ordered?
No, the vouchers are things of value.
2. If a real estate licensee provides tickets to sporting events to appraisers who have done appraisals on the agent’s transactions, is this a RESPA violation?
Yes, the tickets constitute a thing of value and may be considered in exchange for business.
3. Can an appraiser and a real estate licensee share expenses for a booth at a trade show?
Yes, Appraisers and real estate agents may share these expenses so long as each pays their proportionate cost ~ must be 50/50.
4. An appraiser collects a $375.00 appraisal fee from the lender on behalf of the borrower. The lender has not issued a good faith estimate. Is this a RESPA violation?
Yes. The regulations provide that the only charge a lender may impose on the borrower before issuing a GFE is limited to the cost of the credit report.
5. If an appraiser has performed over 60 appraisals for a mortgage lender, may the lender reimburse the appraiser for the appraiser’s continuing education costs?
No, this would defray a cost the appraiser would normally incur in the ordinary course of business and is prohibited by REPSA.
1. You just came into your office to pick up your commission check on an escrow you just closed. Left in the office is a vase of flowers for you with a note from the escrow officer you used in the transaction. The note says, “Just a note to say thanks for the business and let’s do more!” You leave the flowers at the office for everyone to enjoy. Are you and the escrow officer in violation for Section 8 of RESPA?
Yes, your action is considered accepting the gift. To avoid being guilty of violating RESPA, you must dispose of the flowers in some manner and document doing so in writing or contact the escrow officer and tell him/her you appreciate the gesture but this action is in direct violation of RESPA Rules & how can you return the flowers or would he/she want to give them to the buyer in the escrow officer’s name, which would not be a violation for either of you.
2. If a listing agent sends a gift to the agent who represented the buyer in a purchase transaction has RESPA been violated by either agent?
No, gifts between real estate licensees are not covered by RESPA rules.
3. You held an Open House and a Mortgage Broker gave you a plate of cookies to give out at the Open House. The Broker stayed at the Open House as long as you did and talked to people as they came in and gave them their business card and marketing items. Are either of you guilty of violating Section 8 of RESPA?
NO, as long as the Mortgage Broker stayed and marketed him/herself to people who came and went- neither of you is in violation of RESPA. But, you would be in violation of RESPA if the Mortgage Broker simply dropped off cookies/snacks and marketing materials for you to hand out.
4. On the back of your business cards you have a statement that says, “For every sale I make in 2013, I will donate $100.00 to the charity of your choice in your name.” Is this a violation of Section 8 RESPA?
NO, it is not a violation of Section 8 and since you have a definite expiration date, it is not a violation of Arizona Department of Real Estate Rules & Regulations either. If your offer had no expiration date, it would be a violation of the ADRE Rules and Regs.
5. To attract more traffic to your Open House, you sent out flyers to the entire neighborhood telling everyone you will be having a drawing for a free weekend in Rocky Point! All they have to do is come to your Open House, fill out a card and put it in the bucket for a chance to win. Are you in violation of Section 8 RESPA?
NO, this is not a RESPA violation. But since you’re offering a lottery, you are in violation of the ADRE Rules and Regulations and have placed your real estate license in jeopardy. ADRE Rules and Regulations prohibit any type of incentive offering that may be considered a lottery.
1. If a custom home builder pays a referral fee to a real estate agent who represented a buyer, has RESPA been violated?
No. However, Arizona Commissioner’s Rules and the REALTOR® Code of Ethics require that the licensee obtain the client’s permission and disclose to the client any compensation received that was related to or resulted from the transaction.
2. A REALTOR® displays a billboard outside the Builders new home subdivision. The REALTOR® puts the mortgage lender’s name and phone number on the billboard and does not ask the mortgage lender to pay any of the costs for the billboard. Is this a RESPA violation?
Yes. The mortgage lender should pay their prorated costs for their section of advertisement on the billboard.
3. Is it a RESPA violation if the builder/seller requires the buyer to use a specific title company when the builder/seller is paying for the buyer’s title insurance?
No. The Department of Housing and Urban Development (HUD) has indicated that it “will not enforce Section 9 of RESPA against a builder/seller who selects the title insurance company if the builder/ seller is paying for the owner’s title insurance policy, and does not require the buyer to use the title insurance company for the simultaneously issues lenders policy.”
4. If a real estate agent or builder gives cash back to a home purchaser after the close of escrow has RESPA been violated?
Yes. Any cash back to buyer paid after closing would be a violation. If cash or other concessions are given to the buyer, they must be disclosed on the HUD-1 closing statement.
5. Is it a RESPA violation for Builders to give REALTORS® gift cards for visiting their home sites?
No. Builders are not settlement service providers and therefore are not held to RESPA Rules in this situation.
HOME INSPECTION QUESTIONS
1. A home inspector offers a REALTOR® $15.00 for every lead the home inspector receives. Is this a violation of RESPA?
Yes, ANY “thing of value” received in the anticipation of business would be a violation.
2. Is it acceptable for your home inspection company to provide your office with pens and/or notes pads that reflect the inspection company’s name?
Yes, it is allowable if these are normal marketing tools and there is no mention or promise of referral fees or opportunities to receive compensation for referrals.
3. Is it a RESPA violation if a home inspector provides a template for a discount coupon on his/her company’s website to the public if an agent gives it to a buyer/seller client?
No, this is a public website available to everyone. The agent may want to direct the client directly to the website and have the client print off the coupon so as to not be part of “promoting” the inspectors business as a referral “kick back”.
4. Is it a RESPA violation for a home inspection company to offer the opportunity to win a prize in return for using their service?
Yes, this is considered a “thing of value” in exchange for referrals.
5. A home inspector offers a 25% discount to an Investor client who consistently uses only this home inspector. Is this a RESPA violation?
No, the investor is not a settlement service provider and it is a client benefit.
HOME WARRANTY QUESTIONS
1. Is a home warranty company a settlement service provider and bound by the RESPA Rules and Regulations?
Yes, a settlement service provider is one who provides services in connection with the purchase or sale of a property that are paid for, directly or indirectly, out of the funds at settlement (COE). Home warranty companies have specifically been covered by RESPA since the 1992 RESPA Rule revision. Since most home warranties are sold in connection with a property sale ~ therefore the company selling the warranty would be a settlement service provider and bound by RESPA Rules & Regulations.
2. A golf charity tournament is planned by a local real estate company and they have requested that the home warranty company sponsor a hole and provide a “goodie” for the swag bags and $$ for the “giveaways.” The home warranty representative is not able to attend the function but does provide the requested items for charity. Is this a RESPA violation?
YES, unless the representative (or someone from the company) is present at the event it would be a RESPA violation because the real estate company is receiving dollars/gifts etc….but no marketing was done personally by the home warranty company.
3. Can a REALTOR® receive a commission from a home warranty company for encouraging a buyer or seller to purchase a home warranty?
NO, RESPA prohibits commissions as a condition of referring business.
4. A home warranty company is sponsoring a CE credit class providing refreshments and paying for the instructor at no cost to the REALTOR®. Is this a RESPA violation?
Yes, a CE class is an item of value and the REALTOR® should pay for the class. If it is simply a “lunch & learn” with no CE credit, it is not a RESPA violation.
1. Is it legal for a REALTOR® Association to solicit sponsorships from mortgage lenders for Association functions such as award ceremonies and fundraisers?
Yes. While such events provide something of value to the association, the association is not in a position to refer business to the mortgage lender. Thus, it is legal.
2. If a mortgage company sponsors an educational seminar for brokers and agents (not providing continuing education credit) at Westin La Paloma, is it a violation of RESPA?
No. Since it is not for credit hours, it is not a violation of RESPA. If it had provided free continuing education credit then it would defray the expenses of the agent and that would be a RESPA violation.
3. After completing a successful transaction, a loan officer receives a card from the buyer’s agent with $100 in it and a note that says “thanks for all your hard work.” Can the loan officer donate the money to a charity to avoid being in violation of RESPA?
No. The correct way to avoid the violation would be to return the money directly to the agent.
4. A REALTOR® and a lender decide to advertise together to the general public by placing an ad in the newspaper. The lender will pay for 75% of the ad in exchange for 75% of the space. Is this a RESPA violation?
No. But it would be a RESPA violation if the lender used less than 75%.
5. Can a real estate licensee be paid a portion of the origination fee if he or she completes the loan application for the borrower?
No. The person must not only be employed by a licensed mortgage broker, they must perform numerous other loan services aside from taking the loan application.
6. Can a real estate licensee who is also a licensed mortgage broker earn a real estate commission and a loan fee in the same transaction?
Yes. The agent must be an employee of a licensed mortgage broker and perform actual work in originating the loan. Since the person would probably be receiving fees from both the buyer (borrower) and seller, both parties’ written permission and written consent is needed. However, FHA does prohibit this.
7. A mortgage company collects a $375 appraisal fee from the borrower but has not issued the good faith estimate (GFE). Is this a RESPA violation?
Yes. The regulations provide that the only charge a lender may impose on a borrower before issuing a GFE is limited to the cost of a credit report.
8. A lender gives a $50 Home Depot gift card to a homeowner upon the completion of a loan transaction. Is this a RESPA violation?
No. This is not a violation because the homeowner is not a settlement service provider.
TERMITE INSPECTOR QUESTIONS
1. A termite company offers a REALTOR® a gift certificate for $7.50 at a local movie theater for every lead the company receives. Is this a RESPA violation?
Yes, any “thing of value” received in the anticipation of business would be a violation.
2. Is it a RESPA violation for a termite company to supply an agent with marketing materials with the agent’s name & real estate company the agent works for on them?
Yes, as this would benefit the agent in marketing their business at no cost to them, thus offering something of value in exchange for referrals.
3. If a real estate company has interest in a termite company and “directs” business to that termite company, are there any disclosures required under the RESPA rules?
Yes, RESPA requires disclosure of:
· The relationship
· The range of costs for the real estate company’s services
· The fact that the consumer is not required to use the real estate company’s affiliate services
**Remember similar disclosures are required whenever there is an affiliated business relationship- AfBA- between any settlement service providers.
4. Should you allow a termite company to come to your weekly company meeting to teach agents the termite inspection process at no charge to the agents or Broker?
Yes, Settlement service providers may put on classes about their businesses since such informational programs are consistent with the marketing of the business.
TITLE/ ESCROW QUESTIONS
1. Is it a RESPA violation if an escrow/title company hosts an educational event at their office that includes a paid instructor and food and drinks with REALTORS® receiving CE hours?
Yes. A CE class is an item of value and the REALTOR® should pay for the class. If it is simply a “lunch and learn” with no CE credit, it is not a RESPA violation.
2. A real estate agent has referred a tremendous amount of business to a title/escrow agent far more than any other agent in town and the escrow agent sends over a gift certificate for a day at the spa with a note that says “thank you for all of your business and let’s do more together in the future.” Is this considered a RESPA violation?
Yes. The gift certificate constitutes a thing of value and may be considered in exchange for business. A simple thank you note is acceptable and not in violation.
3. A title/escrow agent and a REALTOR® agree to participate in a booth together at a local event for marketing purposes. The escrow agent gets a big discount for knowing the event coordinator and pays a nominal fee for the booth. Each agrees to bring their own marketing materials and pay for all other advertising and marketing costs 50/50. Is this a RESPA violation?
Yes. The escrow agent and REALTOR® must split the entire event costs 50/50 in every way. The REALTOR® must pay for half the booth and split any and all costs equally.
4. If a title company provides lunch at an agent’s open house but they do not attend would this be considered a RESPA violation?
Yes. This payment of lunch would be a thing of value for, or in the hopes of, the referral of business.
5. When selling bank owned properties is it a RESPA violation for the bank to require the buyer to obtain title insurance from a particular title company?
No. It is not a violation if the bank is paying the for the owner’s policy. However, if the buyer is willing to pay the owner’s title policy then they are free to choose any title company. If the bank were still requiring a certain title company then that would be a RESPA violation.
6. An LLC is the seller of a property. The escrow officer handling the transaction is one of the owners of the LLC and this is not disclosed. Is this a RESPA violation?
No this is not a RESPA violation, but does need to be disclosed.
7. Three real estate companies from a legally licensed title agency to which they all refer business with appropriate disclosures to clients. If the title agency refers out the title work to another title company and receives a referral fee solely for the referral is RESPA being violated?
Yes. RESPA requires that actual work be performed. If fees are paid when no work is performed the arrangement is considered to be a sham and RESPA is violated.
8. If a HUD-1 closing statement is used to close on an “all cash” real estate transaction does the RESPA rules and regulations apply?
No. The following transactions are not covered under RESPA: an all cash sale, a sale where the individual home seller takes back the mortgage, a rental property transaction or other business purpose transaction.