Question

When Stacy’s clients ask her if she can recommend a mortgage broker, she promptly gives them the name of the best mortgage broker she knows, Gary Jones. Later, she always receives a check from Gary as payment for the referral. Is this legal or illegal under the Real Estate Settlement Procedures Act?

Answer 1

Answer: It is illegal under Real Estate Settlement Procedures Act (RESPA).

Explanation: RESPA is the acronym for the Real Estate Settlement Procedures Act. It is a federal consumer protection law enacted by the United States government, which is directed by the U.S. Department of Housing and Urban Development (HUD).

However, one of the major reasons of the enactment of this law is to prevent or stop some unlawful practices done by real estate settlement provider. Such unlawful practices include kickbacks and referral fees, that in turn causes increase in settlement costs for home buyers.

Hence, Gary’s payment to Stacy for the referral is considered illegal.