National Real Estate Exam (PSI)FinancingMedium
A loan officer refers all title insurance business to a particular title company in exchange for a monthly cash payment from that company. This arrangement most likely violates which federal law?
- AEqual Credit Opportunity Act
- BReal Estate Settlement Procedures Act
- CFair Housing Act
- DTruth in Lending Act
Show answer & explanationAnswer & explanation
Correct answer: B. Real Estate Settlement Procedures Act
RESPA prohibits kickbacks and unearned fees for referrals of settlement service business, such as title insurance, in federally related mortgage transactions.
Why the other options are wrong
- A. ECOA prohibits credit discrimination, unrelated to referral fees.
- C. The Fair Housing Act addresses housing discrimination, not referral payments.
- D. TILA governs disclosure of credit terms, not referral kickbacks.
RESPA Anti-Kickback Rule
The Real Estate Settlement Procedures Act prohibits giving or accepting fees, kickbacks, or anything of value for referrals of settlement service business.
- Applies to federally related mortgage loans
- Requires disclosure via Loan Estimate and Closing Disclosure
- Violations can result in fines and criminal penalties
Memory trick: RESPA says no paying for pushing people to a particular provider.