When RESPA goes unpunished, an angel loses its wings.

This is a story all to familiar to loan officer, but I felt the rest of the Real Estate Industry and the population of “consumers” should be aware of what’s happening (or rather what’s not happening) in transactions that could cost you serious dough.  All Mortgage Lending Regulatory agencies will tell you, “consumers should have unbias choices” when determining their Real Estate and Lending Team.  That being, a consumer should be able to pick their choice of lender without being influenced by anyone who’s party to the transaction.  Very simple, right?  Well, that’s not always the case.  There are cases where influence is subtle and a consumer may not even realize the fix is in.  However there are other cases that hit consumers right between the eyes, where they’re acutely aware that they’re being “strong-armed” into using groups or entities that they do not want to use.  This is such a story.  My question is, “if I see it, if Realtors see it, if Lenders see it, how is it that every oversight agency has not seen it?  It baffles the mind.  So I wanted to share with you an actual story of respa violations that is going on right now, as you’re reading this.  With that said understand, after you finish watching the video, there are thousands of cases exactly like this taking place across the country, every week.

13 Discussions on
“When RESPA goes unpunished, an angel loses its wings.”
  • Wouldn’t this be true when a builder offers $5000 to be used towards upgrades or closing costs if you use their lender? If the consumer wants to use an outside lender, shouldn’t they still get the $5000 – it is definitely a thing of value with “strings attached,” right?

    • I know that I’m a little passionate about this. I work with a builder and it is a TON of work. When other lenders accuse us of breaking the law I sort of take it personally. So I’m standing up for this lender and builder in this instance.
      The builder can provide a reduction in price, a closing cost incentive, an upgrade to the consumer. That isn’t illegal, if it is then I apologize for not understanding the law. It becomes Illegal when the lender gives something of value to the builder in exchange for a referral. Someone please tell me if I’m wrong.

  • Can realtors and/or builders give any jo blow a $5,000 or more referral fee for someone sending them a deal? Does the consumer need to know or need anything disclosed? Just wondering if builders can do that type of stuff. I thought a realtor would have a professional responsibility to disclose they are getting a kickback from a builder. Still want to know it they can just dole out to anyone. Thanks in advance.

  • Problem is…. until SOMEBODY prosecutes it nothing is going to change, just like everything else. I can go 60 mph in a 55 zone, yes breaking the law, but until a cop gives me a ticket, I am going to keep doing it. The old adage when dealing with the IRS holds true here as well….everything is deductable, until you get audited,

  • I just lost a family members new construction build to First colony as well as they gave the closing costs incentive to the buyer if they used first colony vs an outside lender!

  • Does anyone have any insight on whether or not iit’s a respa violation for a builder to pay an owners title if they use the builders preferred lender? If so , what can I do about it? This happens all the time.

    • It depends, but I would initially argue no, it is not a violation. If payment of the policy is a negotiated part of the contract, consideration is being provided by both parties.

    • The builder can provide a benefit to the consumer.
      What is illegal is if the LENDER gives something of Value to the BUILDER.
      Am I wrong? Every loan officer can list about 10 different builders that offer an incentive, whether it be upgrades, closing costs credit, etc. when the buyer uses their preferred lender. Are they all breaking the law?

  • I agree it should be illegal but I think the builder “seller” can accept any offer. I don’t believe they are regulated the same as the lenders.

  • Someone needs to learn to distinguish between a referrals for value (illegal) and a consumer rebate (not illegal). Perhaps the snip-it of the transaction outlined in the video did not provide enough information to distinguish the between the two in this case. So long as the benefit goes to the consumer, the reference to Section 8(a) of RESPA is misleading.

  • To everyone looking at this post, please see what ROD wrote. He appears to be the only one commenting or posting on this site that knows what he is talking about. In this case it looks like builder is offering an upgrade to the consumer to use the builders preferred lender. Totally Legal.
    If that is Illegal then just about every builder in the country is breaking the law. I’ve lost a lot of business to builders preferred lenders. But If I wasted my time whining about it it would prevent me from going out and creating my own referral partners.

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