RESPA or Real Estate Settlement Procedures Act

RESPA does not prohibit payments by mortgage companies to real estate agents. RESPA authorizes payments for services "actually performed" and does not qualify to whom these payments may be made. RESPA further states "[n]othing in this section shall be construed as prohibiting...[t]he payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed." 12 US C 2607(c)(2). This means, we may pay real estate professionals. But in connection with these payments, there are certain fundamental issues to keep in mind-payment for services actually provided; reasonableness of payments; and no duplication of services.

24 C.F.R § 3500.2.

In a February 14 and June 20, 1995 letters from assistant HUD secretary Nicolas Retsinas to the Independent Bankers Association of America, outlined HUD's enforcement position concerning payments to intermediaries (mortgage brokers) for origination-related functions and then formalized the guidance in Statement of Policy 1999-1. Mr. Retsinas identified a list of activities that should be performed in order to avoid HUD scrutiny and justify compensation.

• 14 non-exclusive services are "normally performed:"
• (1) taking loan applications;
• (2) pre-qualifying (counseling);
• (3) educating and counseling (counseling);
• (4) collecting financial information (counseling);
• (5) ordering employment and deposit verifications;
• (6) ordering mortgage and other loan verifications;
• (7) ordering appraisal;
• (8) ordering inspections and engineering reports;
• (9) providing disclosures;
• (10) assisting borrowers in understanding and clearing credit problems (counseling);
• (11) maintaining contact with borrowers, real estate professionals, and lenders between application and closing (counseling)
• (12) ordering legal documents;
• (13) determining property flood zone issues; and
• (14) participating in the closing.

Taking the application is necessary, but not sufficient. The originator must perform at least five other services. This requirement has become known as the "six services rule."

• But any "six services" are not enough. An originator who provides only "counseling type" services must also satisfy the following:
• (1) give the applicant the opportunity to consider products from at least three lenders;
  
• (2) must itself (the broker) receive the same compensation regardless of the lender selected; and
• (3) the total payment received must be reasonably related to the services performed.