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#616969 - 09/22/06 02:45 PM Referral fee confusion
Anonymous
Unregistered

Here's the scenario, to the best of my knowledge:

Bank is the settlement agent. Seller, a closing corporation, is requesting that we indicate on the HUD-1 a referral fee, to be deducted and due from the listing agent's commission, as a POC "as allowable by RESPA for informational purposes". We have never dealt with this kind of transaction before. Where would we put this information?

Thanks for the help!

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#616970 - 09/22/06 05:37 PM Re: Referral fee confusion
Title topics Offline
Junior Member
Joined: Aug 2006
Posts: 48
east coast
What you would do on the HUD is under 700 show total amount as well as % to realtor. Under that line should be a split section that is the proper place to put the POC for the corp. This should ( depending on your software ) show the total $ on the HUD and also the corporation split or % with the realtor.
If it will not do it there then go to 701 and list the corps POC.
The seller is receiving a ( Referral Fee ) from the listing Agent ? I will be honest with you ,I don't like the way that sounds at all. We have REO companies selling for banks that pay a discounted agents fee. But never a referral fee back.
I would make contact with the listing agent to make sure there was a contract between the two for the split.
_________________________
Title Topics is the owner of National Title and closing service and Is not offering legal advice.

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#616971 - 09/22/06 06:06 PM Re: Referral fee confusion
Title topics Offline
Junior Member
Joined: Aug 2006
Posts: 48
east coast
update to my post: I have spoke with several of my own escrow officers and they smell fish also. If the realtor gets paid full commission then POC's part of that back to Seller, then realtor is paying taxes on full amount as income. If seller contracted with listing agent for less commission then why not have that in the sales contract ? Is the closing Corp. deed holder and true seller of the property ? If not the real seller, then you have a third party kick back scenario, and not legal under RESPA.
_________________________
Title Topics is the owner of National Title and closing service and Is not offering legal advice.

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#616972 - 09/23/06 05:05 PM Re: Referral fee confusion
Lucy Griffin Offline

Diamond Poster
Lucy Griffin
Joined: Nov 2000
Posts: 1,544
I agree that the "referral fee" is probably illegal under RESPA -- no matter where you put it on the HUD-1. The party charging the fee may be confident that they will never be caught and held accountable. However, the bank will be. Your ultimate solution may be to forego the business and tell them to get another settlement agent.

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#616973 - 09/25/06 03:15 PM Re: Referral fee confusion
Anonymous
Unregistered

None of this makes any sense to me!

But I do believe that the closing corp is the deed holder/seller in this transaction.

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#616974 - 10/01/06 10:08 PM Re: Referral fee confusion
Lucy Griffin Offline

Diamond Poster
Lucy Griffin
Joined: Nov 2000
Posts: 1,544
One of the difficulties in analyzing a RESPA issue is that RESPA runs in all directions. For example, both the payor and receiver of a kick-back have violated RESPA. Examiners have often taken the position that if the bank merely collects an illegal fee for one of the settlement service providers, the bank is a participant in the illegal behavior. Who owns the property, who puts forward the money, and who writes the documents is not therefore the deciding factor here. It is whether or not the fee is illegal. If so, everyone involved is guilty.

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