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We would like to run a promotion for residential real estate loans where the bank would pay a credit towards the appraisal fee. Are there any potential issues with the promotion or RESPA concerns? – IBA Compliance Connection

IBA Compliance Connection

Your go to source for compliance!

We would like to run a promotion for residential real estate loans where the bank would pay a credit towards the appraisal fee. Are there any potential issues with the promotion or RESPA concerns?

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Provided that this promotion is open to all customers, we do not see any issues under the Real Estate Settlement Procedures Act (RESPA) prohibition against kickbacks for referrals of settlement services. Providing incentives to borrowers to do business with your bank would not implicate any RESPA concerns.

For resources related to our guidance, please see:

  • RESPA, 12 USC 2607(a) (“No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.”)
  • Regulation X, 12 CFR 1024.14(b) (“No person shall give and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person . . . A company may not pay any other company or the employees of any other company for the referral of settlement service business.”)
     
  • HUD, FAQs About RESPA for Industry, Question 17, page 3 (“Q: Can a lender give a borrower an incentive, such as a chance to win a trip or a rebate, for doing business with the lender? A: RESPA does not prohibit a lender or other settlement provider from giving the borrower an incentive for doing business with it as long as the incentive is not based on the borrower referring business to the lender.”)