what does respa prohibit 
respa prohibits specific practices such as kickbacks referrals and unearned fees for example section 8 prohibits any person from giving or receiving something of value in exchange for referrals of a settlement service business it also regulates the use of escrow accounts such as prohibiting loan servicers to demand excessively large escrow accounts and restricts sellers from mandating title insurance companies 4respa does allow an exception in which brokers and agents can exchange reasonable payments in return for goods or services provided by other settlement service providers as long as those arrangements are compliant with the law and regulatory guidelines 5respa does not prohibit joint market efforts between a real estate broker and a lender as long as advertising costs paid by each party are related to the value of any goods or services that might be received in return but transactions in which one party pays more than a pro rata share of advertising costs are prohibited sponsorship of events also may be considered prohibited actions if one party uses the event to market or advertise its services 6real estate brokers and title agents are barred from entering into market service agreements when one party charges the other an amount for marketing materials that exceeds the fair market value of marketing services performed a settlement service provider may not rent space from another settlement service provider unless it s paying fair market value to do so 7real estate brokers cannot pay agents to refer clients to the broker s affiliate mortgage company brokers cannot offer referral fees to other brokers for directing clients to their business these cooperative fees are prohibited and are essentially viewed as a form of kickback mortgage lenders cannot offer any type of referral incentive to local real estate agents for referring homebuyers to their loan products 4real estate brokers cannot refer business to an affiliated title company without disclosing that relationship to their customers this disclosure must detail the charges that the title company requires for its services and the broker s financial interest in the title company customers also must be made aware that they re not required to use the title company to which they ve been referred real estate brokers and title insurance companies cannot create an affiliated company to collect dividends from referrals 4lenders cannot require borrowers to use a particular affiliate settlement service provider however they can provide financial incentives to do so for example a homebuyer may be able to take advantage of affiliated services at a discounted rate 6in march 2024 the national association of realtors settled a class action lawsuit by homeowners who alleged that the nar had inflated the commissions paid to its realtors if the deal is finalized by the court it is likely to lead to substantially smaller commissions in the future 8enforcement procedures for respa violationsa plaintiff has up to one year to bring a lawsuit to enforce violations where kickbacks or other improper behavior occurred during the settlement process if the borrower has a grievance against their loan servicer there are specific steps they must follow before any suit can be filed the borrower must contact their loan servicer in writing detailing the nature of their issue the servicer is required to respond to the borrower s complaint in writing within 20 business days of receipt of the complaint the servicer has 60 business days to correct the issue or give its reasons for the validity of the account s current status borrowers should continue to make the required payments until the issue is resolved 9a plaintiff has up to three years to bring a suit for specific improprieties against their loan servicer any of these suits can be brought in any federal district court if the court is in the district where either the property is located or the alleged respa violation occurred 10if you don t use a lawyer throughout your real estate transaction it s best to get in touch with one immediately if you believe a respa violation has occurred a real estate lawyer will be able to help you navigate the legal process criticisms of respacritics of respa say that some of the abusive practices that the law is designed to eliminate still occur including kickbacks one example of this is lenders that provide captive insurance to the title insurance companies that they work with a captive insurance company is a wholly owned subsidiary of a larger firm that is tasked with writing insurance policies for the parent and does not insure any other company critics say this is essentially a kickback mechanism because customers usually elect to use the service providers already associated with their lender or real estate agent although customers are required to sign documents that say they are free to choose any service provider because of these criticisms there have been many attempts to make changes to respa one proposal involves removing the option for customers to choose to use any service provider for each service in place of this would be a system where services are bundled but the real estate agent or lender is responsible for directly paying for all other costs the advantage of this system is that lenders who always have more buying power would be forced to seek out the lowest prices for all real estate settlement services who does the real estate settlement procedures act respa protect the real estate settlement procedures act respa is intended to protect consumers who are seeking to become eligible for a mortgage loan however respa does not protect all types of loans loans secured by real estate for a business or agricultural purpose are not covered by respa 11