What is RESPA

A RESPA violation occurs when someone breaks the rules of the Real Estate Settlement Procedures Act (RESPA)—a federal law designed to protect consumers during real estate transactions involving federally-related mortgage loans.

What RESPA Prohibits (Common Violations)

1. Kickbacks & Referral Fees (Section 8)

This is the most well-known RESPA violation.It is illegal for any real estate agent, lender, title company, inspector, or other real estate professional to:

• Give or receive anything of value in exchange for a referral

• Make under-the-table payments, “marketing fees,” or quid-pro-quo arrangements

• Split fees with someone who did not actually perform services

Examples:

• A lender gives an agent gift cards or cash for every buyer referral

• A title company pays an agent “marketing fees” that are really disguised referral payments

• A home warranty company gives bonuses for sending them clients

2. Unnecessary Fees / Fee Splitting

Charging consumers junk fees or splitting fees for services not actually performed is also illegal.

Examples:

• Two companies charging the same customer for the same service

• A settlement provider adding an extra “processing fee” that has no purpose

3. Required Use of a Particular Service Provider

A real estate professional cannot require consumers to use a specific:

• Lender

• Title company

• Home inspector

• Insurance company

Unless it is clearly disclosed and meets specific exceptions (rare).

4. Failure to Provide Required Disclosures

RESPA requires certain disclosures for transparency, including:

• Loan Estimate

• Closing Disclosure

• Servicing transfer notices

• Affiliated business arrangements (AfBA) disclosures

Failing to provide these on time—or at all—is a violation.

Why RESPA Matters

RESPA exists to ensure:

• No hidden fees

• No secret payments between real estate professionals

• Consumers can freely choose service providers

• Settlement costs are transparent and fair