By: Cate S. Hoskins

A number of licensed real estate agents have long held to the common belief that referring less than three mortgage lenders to a purchaser of real property is a per se violation of the Real Estate Settlement Procedures Act (“RESPA”), Section (8)(a). In fact, RESPA contains no such exact prohibition or mandate for what has become the common practice of providing three different lender’s business cards to each buyer. As providers of “settlement services” under Section (8) (a), mortgage bankers and brokers, as well as real estate brokers and affiliated licensees, are prohibited from accepting “…any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.”

Therefore, it is the agent’s intent in providing a referral to a lender and the lender’s response to that referral and not the number of referrals that determine the parties’ compliance with RESPA. Violations could occur with three or more referrals as easily as one referral if any or all of the referrals were given in expectation or anticipation of receiving a return referral or “thing of value” such as a contribution to marketing expenses, i.e. flyers and/or signs.

Ms. Hoskins is a Partner in the law firm of O’Kelley & Sorohan, LLC specializing in residential real estate transactions. For more information regarding office locations and services offered by O’Kelley & Sorohan, LLC, please visit their website at www.okelleyandsorohan.com.