Real Estate Agents Have To Beware Of RESPA Too

One of RE-Insider’s goals has always been to educate real estate agents about the possible pitfalls they negotiate daily.

Perhaps the biggest issue we’ve tackled has been RESPA compliance – especially for real estate agents.
RESPAnews recently came out with an in-depth story on how important it is for real estate agents to understand RESPA laws. Some highlights of the article are below:

With all the talk about new disclosure forms and servicing regulations, it may seem like RESPA is only an issue for lenders, closing agents and mortgage loan servicers. That is not the case. Real estate agents also need to be wary of RESPA.

“I would say the biggest concern is the huge changes to the closing documents and closing process,” Ken Trepeta, director of real estate services at NAR said. “We are very concerned that there will be much confusion and many delayed closings if the proposal is not fundamentally altered. In fact, we are advocating they drop the back end changes almost completely and focus on getting the upfront disclosure, [the Loan Estimate], right.”

The Consumer Financial Protection Bureau (CFPB) took over the regulation of RESPA in July 2011, and it appears the bureau is taking RESPA violations seriously. They’ve reopened a U.S. Department of Housing and Urban Development (HUD) investigation involving kickbacks and captive reinsurance. Recently, the bureau declined to set aside a civil investigative demand by one of the companies under investigation.

It’s clear that RESPA violations should not be taken lightly and that the CFPB is picking up right where HUD left off.
With all the talk about new disclosure forms and servicing regulations, it may seem like RESPA is only an issue for lenders, closing agents and mortgage loan servicers. That is not the case. Real estate agents also need to be wary of RESPA.

Remember, a RESPA violation carries significant consequences. A RESPA violation could mean receiving a fine of up to $10,000 for each offense and could include imprisonment for up to one year. In some cases, RESPA allows for a private cause of action, permitting the consumer to sue the violator for three times the amount the buyer paid for the settlement service.

To avoid a Consumer Financial Protection Bureau investigation, it’s best to review your interactions with other settlement services providers and make sure that you are RESPA compliant.

  • Dave Reynolds

    I think that too many agents don’t pay attention to RESPA laws, thinking that their agreements with brokers will protect them. ATTENTION AGENTS – THIS IS NOT TRUE

  • Wrong Again

    Wrong again Dave – brokers agreements indemnify agents unless agents fail to do their job and results in “substantial” monetary loss.

  • James

    Not only do broker agreements not indemnify agents, but, as this site has repeatedly stated, liability for past issues follows the AGENT across time and space. Even if you get a new job, in a new state, with a new broker, your liability can follow you.