From the U.S. Department of Housing and Urban Development
The following article, which appeared in the Utah, Real Estate News, is being reprinted because of its relevance to North Carolina licensees. The Utah Real Estate News granted permission for its reprinting.
Our office has recently received a large volume of complaints from mortgage lenders regarding the practices of some real estate professionals. These lenders have reported that certain real estate agents and brokers are soliciting referral fees for steering clients to their organizations for loan approval.
The purpose of this notice is to inform you that this practice is strictly prohibited under the Real Estate Settlement Procedures Act (RESPA). Payment of a referral fee might cause an agent or broker to refer all business to a lender who is currently paying the best fee rather than to a lender who could provide the best service at the least cost to the borrower. Further, a lender would jeopardize its HUD approved status by being put in a position to violate our regulations in order to be competitive in the industry.
A new task force has recently been established within the Department of Housing and Urban Development to identify these violations. This group, known officially as the RESPA Enforcement Unit, has its headquarters in Washington and is designed to check out allegations of kickback schemes anywhere in the nation.
We are prepared to initiate administrative sanctions against any program participant who violates our requirements in this area. A Limited Denial of Participation will be imposed against the agent or broker and the loan officer. This would prohibit any involvement in FHA programs for up to one year. We will also make a complaint to the state licensing agency based on unprofessional conduct of a licensee.
For real estate firms prosecuted and found guilty of intentional violations, the law provides for penalties such as jail terms, hefty fines, and restitution and damage awards as well as indefinite debarment from federal programs.
We know that most of you in the real estate industry would not knowingly violate HUD regulations. We hope you understand the need for notices such as this so that we can continue our excellent working relationship.