RESPA Frequently Asked Questions

RESPA F AQS

Real Estate Settlement Procedures Act

FAQs

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This is a Compliance Aid issued by the Consumer Financial Protection Bureau. T

he Bureau published a Policy

Statement on Compliance Aids, available at

https://www.consumerfinance.gov/policy-compliance/rulemaking/final-

rules/policy-statement-compliance-aids/, that explains the Bureau’s approach to Compliance Aids.

The questions and answers below pertain to compliance with

the Real Estate Settlement Procedures Act (RESPA) and

certain provisions of Regulation X.

RESPA Section 8 General

QUESTION 1:

What are the provisions of RESPA Section 8?

ANSWER (UPDATED 10/7/2020):

RESPA Section 8 prohibits certain actions related to federally related mortgage loans.

RESPA Section 8(a) prohibits kickbacks for business referrals related to or part of settlement

services involving federally related mortgage loans. 12 USC § 2607(a); 12 CFR § 1024.14(b).

RESPA Section 8(b) prohibits unearned fee arrangements, i.e., splitting charges made or

received for settlement services, except for services actually performed, in connection with

federally related mortgage loan transactions. 12 USC § 2607(b); 12 CFR § 1024.14(c).

RESPA Section 8(c) identifies certain payments that are not prohibited by Section 8. 12 USC

§ 2607(c); 12 CFR § 1024.14(g).

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Appendix B to Regulation X provides examples to illustrate the application of RESPA to

particular fact patterns, including fact patterns under Section 8(a), 8(b), and 8(c) indicating

whether or not a violation occurred. Appendix B to 12 CFR part 1024.

RESPA Section 8(d) details specific penalties for violations of Section 8, including for Sections

8(a) and 8(b). 12 USC § 2607(d).

RESPA Sections 8(a), 8(b), and 8(c) are discussed in more detail in RESPA Section 8 General

FAQs 2 through FAQ 4 and RESPA Section 8(a) FAQ 1 below.

QUESTION 2:

What is RESPA Section 8(a)?

ANSWER (UPDATED 10/7/2020):

RESPA Section 8(a) prohibits kickbacks for business referrals involving a federally related

mortgage loan. RESPA Section 8(a) prohibits the giving and accepting of kickbacks (e.g., cash

or other “things of value” as defined in RESPA and Regulation X) pursuant to any agreement or

understanding to refer settlement service business or business incident to a real estate

settlement service in connection with those loans. 12 USC § 2607(a).

For more information on RESPA Section 8(a), see RESPA Section 8(a) FAQ 1

below.

QUESTION 3:

What is RESPA Section 8(b)?

ANSWER (UPDATED 10/7/2020):

RESPA Section 8(b) prohibits unearned fee arrangements in connection with federally related

mortgage loans. RESPA Section 8(b) prohibits the giving and accepting of any portion, split, or

percentage of charges made or received for real estate settlement service business, unless for

services actually performed. 12 USC § 2607(b).

QUESTION 4:

What payments are not prohibited under RESPA Section 8(c)?

ANSWER (UPDATED 10/7/2020):

RESPA Section 8(c) provides a list of payments (provided or received) and arrangements that

are not prohibited under RESPA Section 8. These include:

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1. Fees paid to attorneys for services actually rendered. 12 USC § 2607(c)(1)(A).

2. Fees paid by a title company to its duly appointed agent for services actually performed in

the issuance of a title insurance policy. 12 USC § 2607(c)(1)(B).

3. Fees paid by a lender to its duly appointed agent for services actually performed in the

making of the loan. 12 USC § 2607(c)(1)(C).

4. Bona fide salary or compensation or other payment for goods or facilities actually furnished

or for services actually performed. 12 USC § 2607(c)(2).

5. Payments under “cooperative brokerage and referral arrangements or agreements between

real estate agents and brokers.” 12 USC § 2607(c)(3).

6. Affiliated business arrangements, subject to specified conditions. 12 USC § 2607(c)(4).

7. Other payments and classes of payments adopted by regulation after consultation with other

specified federal agencies and officials. 12 USC § 2607(c)(5).

Regulation X, 12 CFR §§ 1024.14(g)(1) and 1024.15

implement these RESPA Section 8

provisions and provide details on the payments that are not prohibited by RESPA Section 8,

identified above. These provisions also specify additional payments and activities that are not

prohibited by Section 8, such as: (1) normal promotional and educational activities, subject to

certain conditions, and (2) an employer’s payments to its own employees for any referral

activities. 12 CFR §§ 1024.14(g)(1)(vi) and 14(g)(1)(vii).

Appendix B to Regulation X provides

further guidance on these payments and activities.

QUESTION 5:

Which individuals, entities, and transactions are covered by RESPA

Section 8?

ANSWER (UPDATED 10/7/2020):

RESPA Section 8 prohibitions generally apply to any person, which RESPA defines to include

individuals, corporations, associations, partnerships, and trusts. 12 USC § 2602(5).

RESPA does not apply to extensions of credit to government or governmental agencies or

instrumentalities. It also does not apply to extensions of credit primarily for business,

commercial, or agricultural purposes. 12 USC § 2606.

Regulation X, 12 CFR § 1024.5 provides additional limits on the coverage of RESPA.

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QUESTION 6:

Under RESPA Section 8, can a lender or other settlement service provider

give a gift, refund, or discount to a consumer for using that lender or

provider?

ANSWER (UPDATED 10/7/2020):

Generally, yes.

RESPA Section 8 does not prohibit a lender or other settlement service provider from giving a

consumer a gift or an incentive (e.g., a discount, refund of fees, chance to win a prize, etc.) for

doing business with that entity. However, RESPA Section 8 prohibits, for example, giving an

incentive to a consumer in exchange for the consumer referring other business to that lender or

other settlement service provider.

Other federal and state laws may also have restrictions that apply and should be consulted.

RESPA Section 8(a)

QUESTION 1:

What activities are prohibited under RESPA Section 8(a)?

ANSWER (UPDATED 10/7/2020):

RESPA Section 8(a) and Regulation X, 12 CFR § 1024.14(b), prohibit giving or accepting a fee,

kickback, or thing of value pursuant to an agreement or understanding (oral or otherwise), for

referrals of business incident to or part of a settlement service involving a federally related

mortgage loan.

 Fee, kickback, or thing of value. Thing of value is broadly defined in RESPA and Regulation

X. 12 USC § 2602(2); 12 CFR § 1024.14(d). Regulation X defines the term to include,

without limitation: monies, things, discounts, salaries, commissions, fees, duplicate

payments of a charge, stock, dividends, distributions of partnership profits, franchise

royalties, credits representing monies that may be paid at a future date, the opportunity to

participate in a money-making program, retained or increased earnings, increased equity in

a parent or subsidiary entity, special bank deposits or accounts, special or unusual banking

terms, services of all types at special or free rates, sales or rentals at special prices or rates,

lease or rental payments based in whole or in part on the amount of business referred, trips

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and payment of another person's expenses, or reduction in credit against an existing

obligation. “Payment” is used synonymously with the giving or receiving of a “thing of value”

in Regulation X, 12 CFR §§ 1024.14 and 1024.15, and does not require the transfer of

money. 12 CFR § 1024.14(d).

 Pursuant to an agreement or understanding, oral or otherwise. An agreement or

understanding need not be written or verbalized. It may be established by practice, pattern,

or course of conduct. For example, when a thing of value is received repeatedly, and

connected in any way with the volume or value of business referred, receipt of the thing of

value is evidence that it is made pursuant to an agreement or understanding. 12 CFR

§ 1024.14(e).

 For referrals of business. Referrals include oral or written action directed to a person that

has the effect of affirmatively influencing a person’s selection of a provider of a settlement

service or business incident to or part of a settlement service. That effect can be on any

person in connection with the settlement service or business incident thereto who will pay

for the service or a charge attributable, in whole or in part, to that service or service provider.

12 CFR § 1024.14(f)(1). Additionally, referrals include requiring the use by the person

paying for the service of a particular provider of settlement service-related business. 12

CFR §§ 1024.14(f)(2) and 1024.2(b) (“required use”). Finally, note that prohibited referrals

are not limited to those directed to consumers. They might be directed to a number of

sources, such as appraisers, real estate agents, title companies and agents, lenders,

mortgage brokers, or companies that provide information in connection with settlements,

such as credit reports and flood determinations. 12 CFR § 1024.14(b) and (f).

 Incident to or part of a real estate settlement service involving a federally related mortgage

loan. To be a violation, the referral(s) must be directly or indirectly incident to or part of a

real estate settlement service involving a federally related mortgage loan

. 12 USC

§ 2602(1); 12 CFR § 1024.2(b). Settlement service is defined broadly as any service

provided in connection with a real estate settlement, which includes (but is not limited to)

origination of a loan, closing services, title services, title insurance, document preparation,

property surveys, inspections and appraisals, the rendering of credit reports and appraisals,

and services of attorneys, real estate agents, and mortgage brokers. 12 USC § 2602(3); 12

CFR § 1024.2(b).

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RESPA Section 8: Gifts and Promotional Activity

QUESTION 1:

Are gifts and promotions allowed under RESPA Section 8?

ANSWER (UPDATED 10/7/2020):

It depends.

Under RESPA Section 8(a), gifts and promotions generally are “things of value” and therefore

could, depending on the circumstances, violate RESPA Section 8(a). If the gifts or promotion

are given or accepted, as part of an agreement or understanding, for referral of business

incident to or part of a real estate settlement service involving a federally related mortgage loan,

they are prohibited.

For example, if a settlement service provider gives current or potential referral sources tickets to

attend professional sporting events, trips, restaurant meals, or sponsorship of events (or the

opportunity to win any of these items in a drawing or contest) in exchange for referrals as part of

an agreement or understanding, such conduct violates RESPA Section 8(a). 12 CFR

§ 1024.14(b). Such an agreement or understanding need not be written or oral and can be

established by a practice, pattern, or course of conduct. 12 CFR § 1024.14(e).

There is no exception to RESPA Section 8 solely based on the value of the gift or promotion.

Accordingly, settlement service providers should carefully analyze whether providing gifts or

opportunities to win prizes to referral sources could violate the prohibitions under RESPA

Section 8.

However, in certain circumstances, gifts or promotions directed to a referral source are not

prohibited if they are a “normal promotional or educational activity” meeting the conditions in

Regulation X. 12 CFR § 1024.14(g)(1)(vi).

For more information about the analysis under RESPA Section 8(a), see

RESPA Section 8(a)

FAQ 1, above. For more information about “normal promotional and educational activities”

under RESPA and Regulation X, see RESPA Section 8: Gifts and Promotional Activities FAQ 2

and FAQ 3, below.

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QUESTION 2:

What conditions does Regulation X establish for gifts and promotions to be

“normal promotional and educational activities” allowed under RESPA?

ANSWER (UPDATED 10/7/2020):

Regulation X allows “normal promotional and educational activities” directed to a referral source

if the activities meet two conditions:

 The activities are not conditioned on referral of business; and

 The activities do not involve defraying expenses that otherwise would be incurred by the

referral source.

12 CFR § 1024.14(g)(1)(vi).

Whether a particular item or activity meets each of these two conditions is a factual question.

The first condition is that normal promotional and educational activities must not be conditioned

on referral of business. Factors that are relevant to whether the first condition is met may

include the following:

 Whether the item or activity is targeted to referral sources. If an item or activity is targeted

narrowly towards prior, ongoing, or future referral sources, this could indicate the item or

activity is conditioned on referrals of business. For example, if a promotional item is

provided only to a limited set of settlement service providers who also happen to be current

referral sources or an intentionally targeted group of future referral sources, this may

suggest that the recipient is receiving the promotional item because of past or future

referrals and, thus, the promotional item may be conditioned on referrals. If, instead, a

promotional item is provided to a broader set of recipients, such as the general public or all

settlement service providers offering similar services in a given locality, then that may

indicate that the promotional item is not conditioned on referral of business.

 How often the item or activity is given to the referral source. If a referral source is routinely

and frequently provided with an item or included in an activity, and particularly if that referral

source is provided with the item or included in the activity more often than other persons,

this could indicate the item or activity is conditioned on referrals.

The second condition is that normal promotional and educational activities must not involve the

defraying of expenses that otherwise would be incurred by persons in a position to refer

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settlement services or business incident thereto. Factors that may be relevant to whether the

second condition is met may include the following:

 Whether the item or activity involves a good or service that the referral source would

otherwise have to pay for themselves. If, for example, a promotional activity involves paying

for mandatory continuing education expenses, certifications, licenses, or other items that the

referral source would otherwise need to pay for on their own, the promotional item or activity

is more likely to defray expenses. Similarly, if the activity involves paying for the referral

source’s office supplies branded with the referral source’s name, contact information, or

logo, this is more likely to defray expenses of the referral source. But if the activity involves

providing the referral source with office supplies featuring the name, contact information, or

logo of the entity providing the supplies, this is less likely to defray expenses, since it is

unlikely that the referral source would otherwise use its own funds to purchase office

supplies featuring the name and information of another entity.

If the particular item or activity does not meet either of these conditions, it is not a “normal

promotional or educational activity” meeting the conditions in Regulation X, 12 CFR

§ 1024.14(g)(1)(vi). See RESPA Section 8: Gifts and Promotional Activities FAQ 3

below for

discussion of “normal promotional or educational activities” as applied to examples.

QUESTION 3:

What are examples of “normal promotional and educational activities”

meeting the conditions in Regulation X?

ANSWER (UPDATED 10/7/2020):

Regulation X allows “normal promotional and educational activities” that are not conditioned on

the referral of business and do not involve “defraying” expenses otherwise incurred by that

recipient who is in a position to make a referral. 12 CFR § 1024.14(g)(1)(vi).

Whether a particular item or activity meets the conditions in Regulation X for “normal

promotional and educational activities” depends on the facts and circumstances. For example:

 A settlement agent hosts a one-time-only drawing for a mini basketball set (backboard,

rim, net, and ball). The settlement agent includes an announcement of the drawing in an

email to all previous customers and all loan originators in the city summarizing the

settlement agent’s services and providing the agent’s contact information. The entries to

the drawing are automatically made for every previous customer and loan originator in

the city, regardless of whether the prior customer or loan originator has made or will

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make a referral to the settlement agent. The agent also includes a drawing entry

submission form on their website. The drawing is more likely to meet the conditions for

a “normal promotional and educational activity” under Regulation X because 1) the

drawing entry is not conditioned on referrals and 2) the prize would not defray expenses

as the basketball set is not an expense that persons in a position to refer business to the

settlement agent would otherwise incur.

 A title company hosts a continuing education course for real estate agents who must

meet mandatory continuing education requirements to maintain their license. The title

company charges a course admission fee equivalent to the fair market value of the

course and invites all of the local real estate agents, regardless of their status as referral

sources. The real estate agents pay for their own admission to the course. Under these

facts, the activity is more likely to meet the conditions for a “normal promotional and

educational activity” under Regulation X because 1) the course admission is not

provided conditioned on referrals and 2) the course admission fee is the fair market

value, meaning the title company is not defraying the real estate agent’s expenses for

the course.

 A title company routinely hosts free seminars on recent real estate market

developments. The seminars are open to the public, and they are advertised to all of the

area’s real estate agents, regardless of their status as referral sources. The seminars

are more likely to meet the conditions of a “normal promotional and educational activity”

under Regulation X, because 1) admission to the courses are not conditioned on

referrals and 2) the courses are not defraying expenses that otherwise would be incurred

by persons in a position to make referrals, as they are routinely provided free of charge

for everyone, not just referral sources.

However, with slight changes to these fact patterns, the activities can fail to meet the conditions

for “normal promotional and educational activity” under Regulation X. For example:

 A settlement agent’s drawing for a mini basketball set where the agent’s announcement

and promotion email is sent only to select mortgage loan originators, who are given

drawing entries for each referral the loan originator makes directing others to the

settlement agent is likely not a “normal promotional or educational activity” meeting the

conditions established in Regulation X. This is because the facts and circumstances

indicate the opportunity to win the mini basketball set, or the mini basketball set itself, is

conditioned on the referral of business, given that the persons in the drawing pool are

only those persons who made referrals and also that the number of entries (which affect

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the odds of winning the mini basketball set) are based on the number of referrals. In

fact, as a reminder, this may implicate a RESPA Section 8(a) violation, as discussed in

RESPA Section 8: Gifts and Promotional Activity FAQ 1

, above.

 A title company’s continuing education course that real estate agents use to meet their

license requirements, for which the admission fee is waived if the real estate agent

makes a specified number of referrals, is likely not a “normal promotional or educational

activity” meeting the conditions established in Regulation X. This is because the course

admission fee waiver is conditioned on referrals to the title company (which could also

implicate a RESPA Section 8(a) violation), and the fee waiver is defraying the real estate

agent’s expenses. Similarly, if the title company opens the same continuing education

course to the public and charges an admission fee, but waives the fee for all real estate

agents (regardless of referrals), the activity is still likely not a “normal promotional or

educational activity” meeting the conditions established in Regulation X. This is because

the course fee waiver is defraying expenses that the real estate agents otherwise would

incur, as the course is meeting their license requirements and the fee waiver reduces

their license-related expenses.

For more information about the conditions for meeting the “normal promotional and educational

activities” under Regulation X, see RESPA Section 8: Gifts and Promotional Activities FAQ 2

For more information about the application of RESPA Section 8(a) to promotional or educational

activities, see

RESPA Section 8: Gifts and Promotional Activities FAQ 1.

RESPA Section 8: Marketing Services Agreements

(MSAs)

QUESTION 1:

What are marketing services agreements?

ANSWER (UPDATED 10/7/2020):

Marketing services agreements, or “MSAs,” are agreements that commonly involve an

arrangement where one person (or entity) agrees to market or promote the services of another

and receives compensation in return. MSAs may involve only settlement service providers or

may also involve third parties who are not settlement service providers. For example, an MSA

exists when a mortgage loan originator agrees to market or promote the services of a real

estate agent in return for compensation.

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A lawful MSA is an agreement for the performance of marketing services where the payments

under the MSA are reasonably related to the value of services actually performed. 12 USC

§ 2607(c)(2); 12 CFR § 1024.14(g)(1)(iv). This is distinguished from an MSA that—whether

oral, written, or indicated by a course of conduct, and looking to both how the MSA is structured

and how it is implemented—involves an agreement for referrals. Unlike referrals, as described

in RESPA Section 8: Marketing Services Agreement FAQ 2

, below, marketing services are

compensable services under RESPA. 12 CFR § 1024.14(b) and (g)(2).

Moreover, when a person performing settlement services receives payment for performing

marketing services as part of a real estate transaction, the marketing services must be actual,

necessary, and distinct from the primary services performed by the person. These marketing

services cannot be nominal, and the payments cannot be for a duplicative charge or referrals.

12 CFR § 1024.14(b), (c), and (g)(3).

QUESTION 2:

What is the distinction between referrals and marketing services for

purposes of analyzing MSAs under RESPA Section 8?

ANSWER (UPDATED 10/7/2020):

Whether a particular activity is a referral or a marketing service is a fact-specific question for

purposes of the analysis under RESPA Section 8(a).

As discussed in RESPA Section 8(a) FAQ 1

, referrals include any oral or written action directed

to a person where the action has the effect of affirmatively influencing the selection of a

particular provider of settlement services or business incident thereto by a person paying a

charge attributable to the service or business. 12 CFR § 1024.14(f)(1). For example, referrals

include a settlement service provider directly handing clients the contact information of another

settlement service provider that happens to result in the client using that other settlement

service provider.

In contrast, a marketing service is not directed to a person; rather, it is generally targeted at a

wide audience. For example, placing advertisements for a settlement service provider in widely

circulated media (e.g., a newspaper, a trade publication, or a website) is a marketing service.

MSAs that involve payments for referrals are prohibited under RESPA Section 8(a), whereas

MSAs that involve payments for marketing services may be permitted under RESPA Section

8(c)(2), based on the facts and circumstances of the structure and implementation. More

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information on this analysis is discussed in RESPA Section 8: Marketing Services Agreement

FAQ 3 and FAQ 4, below.

QUESTION 3:

How do the provisions of RESPA Section 8 apply when analyzing whether

an MSA is lawful?

ANSWER (UPDATED 10/7/2020):

Entering into, performing services under, and making payments under MSAs are not, by

themselves, prohibited acts under RESPA or Regulation X. In fact, MSAs are not referenced in

RESPA or Regulation X. Ultimately, the determination of whether an MSA itself or the

payments or conduct under an MSA is lawful depends on whether it violates the prohibitions

under RESPA Section 8(a) or RESPA Section 8(b), or is permitted under RESPA Section 8(c).

The analysis under RESPA Section 8 depends on the facts and circumstances, including the

details of the MSA and how it is both structured and implemented. The following describes how

specific provisions of RESPA frame that analysis.

Under RESPA Section 8(a), if an MS A involves an agreement or understanding to refer

business incident to or part of a settlement service in exchange for a fee, kickback, or thing of

value, then the MSA or conduct under the MSA is prohibited. For example, this can include

(but is not limited to) agreements structured or implemented to provide payments based on the

number of referrals received. For more information about the analysis under RESPA Section

8(a), see RESPA Section 8(a) FAQ 1

, above.

Under RESPA Section 8(b), if the MSA serves as a method of splitting charges made or

received for real estate settlement services in connection with a federally related mortgage loan,

other than for services actually performed, the MSA or the conduct under the MSA is

prohibited. MSAs violate RESPA Section 8(b) if they disguise kickbacks by purporting to

provide payment for services, but a split charge is paid even though the person receiving the

split charge does not actually perform services. Similarly, a violation of RESPA Section 8(b)

occurs if the services are performed, but the amount of the split charge exceeds the value of the

services performed by the person receiving the split. For more information about the analysis

under RESPA Section 8(b), see RESPA Section 8 General FAQ 3

, above.

However, under RESPA Section 8(c)(2), if the MSA or conduct under the MSA reflects an

agreement for the payment for bona fide salary or compensation or other payment for goods or

facilities actually furnished or for services actually performed, the MSA or the conduct is not

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prohibited. 12 USC § 2607(c)(2); 12 CFR § 1024.14(g)(1)(iv). RESPA Section 8(c)(2) does

not apply to MSAs that involve payments for referrals because they are not agreements for

marketing services actually performed. However, RESPA Section 8 does not prohibit payments

under MSAs if the purported marketing services are actually provided, and if the payments are

reasonably related to the market value of the provided services only. Note that under

Regulation X, the value of the referral, i.e., any additional business that might be provided by

the referral, cannot be taken into consideration when determining whether the payment has a

reasonable relationship to the value of the services provided. 12 CFR § 1024.14(g)(2). See

also 12 CFR § 1024.14(b).

QUESTION 4:

What are some examples of MSAs prohibited by RESPA Section 8?

ANSWER (UPDATED 10/7/2020):

As stated previously, an MSA can be lawful under RESPA if it is structured and implemented

consistently as an agreement for the performance of actual marketing services and where the

payments under the MSA are reasonably related to the value of the services performed. 12

USC § 2607(c)(2); 12 CFR § 1024.14(g)(1)(iv) and (g)(2).

However, as discussed in the FAQs above, MSAs can be unlawful when entered into based on

their structure or can become unlawful based on how they are implemented. The Bureau’s

Office of Enforcement has identified violations of RESPA Section 8 in investigations that

involved the use of oral or written MSAs. An MSA is or can become unlawful if the facts and

circumstances show that the MSA as structured, or the parties’ implementation of the MSA—in

form or substance, and including as a matter of course of conduct—involves, for example:

 An agreement to pay for referrals.

 An agreement to pay for marketing services, but the payment is in excess of the

reasonable market value for the services performed.

 An agreement to pay for marketing services, but either as structured or when

implemented, the services are not actually performed, the services are nominal, or the

payments are duplicative.

 An agreement designed or implemented in a way to disguise the payment for kickbacks

or split charges.

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For example, assume a lender enters into an MSA with a real estate agent that also makes

referrals to the lender. The MSA requires the real estate agent to perform marketing services,

including deciding on and coordinating direct mail campaigns and media advertising for the

lender. However, the real estate agent either does not actually perform the MSA’s identified

marketing services or the real estate agent is paid compensation that is in excess of the

reasonable market value of those marketing services.

In this scenario, the lender and real estate agent would not meet the standard in RESPA

Section 8(c)(2), because the marketing services are not actually provided, or the payments are

not reasonably related to the value of the marketing services provided. 12 CFR

§ 1024.14(g)(1)(iv). Further, if in the example the MSA was structured or implemented as a way

for the lender to compensate the real estate agent for client referrals to the lender, the MSA

would violate RESPA Section 8(a).

More information about analyzing MSAs under RESPA Section 8 is available in

RESPA Section

8: Marketing Services Agreement FAQ 3, above.