Is it a RESPA violation for a mortgage lender to pay a percentage of the loan commission to the Realtor?

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Question:

Is it a RESPA violation for a mortgage lender to pay a % of the loan commission to the realtor if the realtor actually takes the loan application and is disclosed on the settlement statement?

Answer:

You could have a serious problem here. HUD maintains that "If the payment of a thing of value bears no reasonable relationship to the market value of the goods or services provided, then the excess is not for services or goods actually performed or provided."

They have also defined examples of what is entailed in the applications process. These include:
(a) Taking information from the borrower and filling out the application;

(b) Analyzing the prospective borrower's income and debt and pre-qualifying the prospective borrower to determine the maximum mortgage that the prospective borrower can afford;

(c) Educating the prospective borrower in the home buying and financing process, advising the borrower about the different types of loan products available, and demonstrating how closing costs and monthly payments could vary under each product;

(d) Collecting financial information (tax returns, bank statements) and other related documents that are part of the application process;

(e) Initiating/ordering VOEs (verifications of employment) and VODs (verifications of deposit);

(f) Initiating/ordering requests for mortgage and other loan verifications;

(g) Initiating/ordering appraisals;

(h) Initiating/ordering inspections or engineering reports;

(i) Providing disclosures (truth in lending, good faith estimate, others) to the borrower;

(j) Assisting the borrower in understanding and clearing credit problems;

(k) Maintaining regular contact with the borrower, realtors, lender, between application and closing to appraise them of the status of the application and gather any additional information as needed;

(l) Ordering legal documents;

(m) Determining whether the property was located in a flood zone or ordering such service; and

(n) Participating in the loan closing.

Doing one item is not sufficient. HUD said that it generally would be satisfied that sufficient origination work was performed to justify compensation if it found that the lender's agent or contractor took the application information and the lender's agent or contractor performed at least five additional items on the list above.

This is detailed at http://www.hud.gov/offices/hsg/sfh/res/resp0222.cfm

First published on BankersOnline.com 7/15/02