Paying referral fees to real estate agents can violate which regulation?

Paying referral fees to real estate agents can violate which regulation?

• A. Truth in Lending Act
• B. Real Estate Settlement Procedures Act (RESPA)
• C. Home Mortgage Disclosure Act
• D. Fair Housing Act

Answer: (B)

The Real Estate Settlement Procedures Act (RESPA) is designed to protect consumers during the home buying process by ensuring transparency in the settlement process and preventing abuses such as kickbacks and referral fees. Under RESPA, paying or accepting referral fees for the referral of settlement service business, including real estate transactions, is prohibited if it is for services that are not actually performed. This means that if a mortgage loan officer pays a real estate agent simply for referring a client without providing a legitimate service in return, it can lead to violations of this act. By instilling these regulations, RESPA aims to promote fair competition and prevent practices that can inflate the costs of settlement services, ultimately protecting consumers from being misled and overcharged. Therefore, engaging in practices such as paying referral fees to real estate agents without the provision of legitimate services is directly in violation of RESPA, making it the correct choice in this context.

The Real Estate Settlement Procedures Act (RESPA) is designed to protect consumers during the home buying process by ensuring transparency in the settlement process and preventing abuses such as kickbacks and referral fees. Under RESPA, paying or accepting referral fees for the referral of settlement service business, including real estate transactions, is prohibited if it is for services that are not actually performed. This means that if a mortgage loan officer pays a real estate agent simply for referring a client without providing a legitimate service in return, it can lead to violations of this act.

By instilling these regulations, RESPA aims to promote fair competition and prevent practices that can inflate the costs of settlement services, ultimately protecting consumers from being misled and overcharged. Therefore, engaging in practices such as paying referral fees to real estate agents without the provision of legitimate services is directly in violation of RESPA, making it the correct choice in this context.