A Bottle of Wine, Prison Time & a 10 Grand Fine Richard Insley, BOL Guru Guru Bios
Question: After closing a mortgage loan we send the realtors, the buyer, and the seller a thank you note and a bottle of wine. My compliance officer says this is a clear violation of RESPA, and will result in prison time and a 10 grand fine. She quotes you in support of her position. Is she right?
Answer: Unless you're particularly fond of blaze orange, you should reconsider ANY gift to a realtor or other party who provides ANY settlement service in connection with a RESPA-covered mortgage loan. Settlement service providers include anyone whose name is required to be shown in Section L of a HUD-1. Since you are not required to name the buyer, seller, or lender, there are no restrictions on "thank you" gifts to these parties.
The penalties cited by your compliance officer are, indeed, prescribed by Section 8 of RESPA. Section 8 could not be more inclusive. It can be triggered by certain gifts or receipts of any "thing of value." Section 8 has no di minimus exception, so any amount of money, goods, or services could be viewed as a "thing of value" and expose you to the penalties. The only additional condition is that the gift/receipt must transpire "pursuant to any agreement or understanding...that business incident to or a part of a real estate settlement service...shall be referred...."
Pavlov's studies probably offer more insight than Section 8 as to the level of "understanding" and reward necessary to trigger coverage. Obviously, the treat is given with the intent to reward preferred behavior. Regardless of the recipient's response, you will incur significant risk if you are giving "things of value" to stimulate referrals. To the extent your treats increase referrals, your risk grows even larger. Although it's unlikely you will do a year at Club Fed, do you want to take the chance?
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