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MBA Compliance Essentials: RESPA I Resource Guide
MBA Compliance Essentials: RESPA I Resource Guide
MBA Compliance Essentials: RESPA I Resource Guide
MBA Compliance Essentials: RESPA I Resource Guide
MBA Compliance Essentials: RESPA I Resource Guide
MBA Compliance Essentials: RESPA I Resource Guide
MBA Compliance Essentials: RESPA I Resource Guide
MBA Compliance Essentials: RESPA I Resource Guide
MBA Compliance Essentials: RESPA I Resource Guide
MBA Compliance Essentials: RESPA I Resource Guide
MBA Compliance Essentials: RESPA I Resource Guide
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MBA Compliance Essentials: RESPA I Resource Guide

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MBA Compliance Essentials RESPA I Resource Guide addresses RESPA's anti-kickback and fee splitting prohibitions, and provides details on how to meet RESPA's exemption provisions. Learn more here …

MBA Compliance Essentials RESPA I Resource Guide addresses RESPA's anti-kickback and fee splitting prohibitions, and provides details on how to meet RESPA's exemption provisions. Learn more here http://www.campusmba.org/ComplianceRESPA.htm

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  • 1. MBA Compliance Essentials SM ba m ed Phillip L. Schulman Partner K&L Gates LLP Holly Spencer Bunting Partner K&L Gates LLP 13597 g or n. io at uc Real Estate Settlement Procedures Act (Part I)
  • 2. MBA Compliance Essentials℠: Loan Originator Compensation Rule Resource Guide m ba Real Estate Settlement Procedures Act (Part I) MBA Compliance Essentials Resource Guide g or n. io at uc ed DC-9714376 v3
  • 3. MBA Compliance Essentials℠: RESPA I Resource Guide DISCLAIMER ba m PLEASE TAKE NOTE: These materials have been produced by K&L Gates LLP. These materials are designed to provide the reader with a general overview and understanding of certain provisions of the Real Estate Settlement Procedures Act (“RESPA”). These materials are not intended to and do not provide legal advice, and do not create an attorney-client relationship with the firm of K&L Gates LLP and the recipient. These materials also do not necessarily reflect the opinions of K&L Gates LLP or any of its attorneys or clients. Provisions of RESPA described herein are, in many instances, paraphrased, and a careful reading of the relevant laws, regulations or cases thereunder may reveal exceptions or different interpretations that might be applicable to a particular set of facts. These materials cover areas in which the proper interpretation of law and regulation can be highly dependent upon particular facts. Accordingly, taking action simply upon the basis of information provided in these materials is not advisable. The materials are not a substitute for consultation with qualified legal counsel regarding the manner in which the laws and regulations referenced herein may be interpreted and applied to particular facts or to particular business models. These materials are for informational and educational purposes only and are not a solicitation and should not be construed as such. K&L Gates LLP expressly disclaims all liability with respect to actions taken or not taken based on any or all the contents of these materials. g or n. io at uc ed ©2013 K&L Gates LLP Copying or other unauthorized redistribution of this publication — in whole or in part — violates U.S. copyright law. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the copyright owner. MBA is not responsible for the content of these materials -2-
  • 4. MBA Compliance Essentials℠: RESPA I Resource Guide TABLE OF CONTENTS Author Biographies and Information about the Firm………………………………..….…… Page 5 Introduction……………………………………………………………………….………………… Page 9 RESPA Background……………………………………………………………………………….. Page 11 Part I: Scope of RESPA………………………………………………………………………….... Page 13 Part II: Section 8 of RESPA: Prohibitions Against Kickbacks and Referral Fees…….. Page 16 m Section 8(a) Anti-Kickback Provisions……………………………………………….. Page 16 Examples of Permissible and Prohibited Conduct……………………..... Page 17 ba Examples of Section 8(a) Enforcement Actions………………………...... Page 20 Section 8(b) Fee-Splitting Provisions………………………………………………… Page 21 ed Page 22 Section 8(c) Exceptions to the Anti-Kickbacks and Referral Fee Prohibitions....................................................................................................... Page 24 Affiliated Business Arrangements…………………………………………… Page 24 Payments for Services or Goods Provided…………………………........... Page 32 Promotional and Educational Activities…………………………………….. Page 36 Payments from an Employer to its Employee……………………………... Page 38 Cooperative Agreements Between Real Estate Brokers and/or Agents…………………………………………………………………………….. Page 39 Payments by a Lender to its Duly Appointed Agent……………………... Page 40 g or n. io at uc Examples of Permissible and Prohibited Conduct……………………….. Payments by a Title Company to its Duly Appointed Title Agent for Services Performed in the Issuance of a Title Policy………... Page 41 Payments to an Attorney for Services Actually Rendered………………. Page 43 Summary………………………………………………………………………….. Page 43 Section 8(d) Penalty Provisions……………………………………………………….. Page 43 Criminal Penalties………………………………………………………………. Page 43 Treble Damages………………………………………………………………..... Page 44 Injunctive Relief………………………………………………………………..... Page 46 -3-
  • 5. MBA Compliance Essentials℠: RESPA I Resource Guide Statute of Limitations…………………………………………………………... Page 46 Regulator Enforcement Authority and Actions……………………………. Page 46 Summary………………………………………………………………………….. Page 47 Part III: Section 9 of RESPA: Prohibitions on the Required Use of Title Companies…………………………………………………………………………………………... Page 49 Part IV: Section 6 of RESPA: Servicing Disclosure Requirements…………………….... Page 51 Conclusion………………………………………………………………………………..…………. Page 53 m Page 54 Exhibit B – Draft RESPA Policy and Procedures…………………………………………….. Page 64 Exhibit C – RESPA Compliance Checklist…………………………………………………….. Page 75 ba Exhibit A – Summary of HUD and CFPB Section 8 RESPA Enforcement Actions…….. g or n. io at uc ed -4-
  • 6. MBA Compliance Essentials℠: RESPA I Resource Guide AUTHOR BIOGRAPHIES AND INFORMATION ABOUT THE FIRM Phillip L. Schulman is a partner in the Washington, DC office of K&L Gates LLP. Mr. Schulman has a national practice specializing in a range of matters related to real estate finance, mortgage banking and consumer finance in both the primary and secondary markets, including: ba m  ed Representing companies in the mortgage lending, home building, title insurance and real estate industries in connection with administrative and regulatory compliance matters, including those involving the CFPB, HUD, VA, Ginnie Mae, Fannie Mae, and Freddie Mac; Advising clients on matters related to approval, origination and servicing requirements under the Federal Housing Administration single-family loan programs;  Defending companies in connection with governmental audits, investigations and enforcement proceedings, before, among others, the CFPB, HUD, VA, DOJ and FTC with specialties involving defense of False Claims Act, FIRREA, Mortgagee Review Board and RESPA enforcement matters;  Developing and analyzing proposed business plans, and drafting the related agreements and disclosures, based upon applicable federal and state laws, regulations and rules, such as the Dodd-Frank Act, Real Estate Settlement Procedures Act, the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Housing Act, state licensing laws, consumer credit laws, usury laws, unfair and deceptive trade laws and real property laws; and  Assisting in litigation involving consumer class action lawsuits and commercial claims. g or n. io at uc  Mr. Schulman is nationally ranked by Chambers USA 2012 under Financial Services Regulation: Consumer Finance (Compliance) (Band 2). Mr. Schulman, a member of the American College of Financial Services Lawyers, is also the former General Counsel to the Home Improvement Lenders Association and was the former Assistant General Counsel of the Inspector General and -5-
  • 7. MBA Compliance Essentials℠: RESPA I Resource Guide Administrative Proceedings Division, U.S. Department of Housing and Urban Development. Mr. Schulman is a frequent lecturer for seminars and conferences sponsored by the Mortgage Bankers Association, the American Land Title Association, the National Association of Realtors and other industry-related groups on various legal issues involving real estate, title, mortgage banking and consumer finance. ba m Mr. Schulman has authored dozens of articles on issues affecting the settlement service industry, and is a contributor to Mortgage Banking magazine, October Research’s The Title Report, NAR’s RESPA Realities and NAHB publications. He is also co-author with Larry Platt of A Practical Guide to the Real Estate Settlement Procedures Act, published by Warren Gorham & Lamont. Mr. Schulman received his undergraduate degree in 1972 and his law degree in 1975 from Northeastern University. * * * * ed g or n. io at uc Holly Spencer Bunting is a partner in the Washington, DC office of K&L Gates LLP. She practices in the areas of mortgage banking and consumer finance, and concentrates on issues of federal and state regulatory compliance and enforcement. Ms. Bunting represents companies in the mortgage lending, title insurance and real estate industries in connection with regulatory compliance matters, and defends clients subject to government audits, investigations and enforcement proceedings. Her practice also includes advising clients about federal and state consumer credit and protection laws and regulations, including the Real Estate Settlement Procedures Act, and reviewing and analyzing existing and proposed business arrangements for compliance with federal and state requirements. In particular, Ms. Bunting specializes in assisting companies in complying with RESPA’s Good Faith Estimate and HUD-1 Settlement Statement disclosures, as well as reviewing business arrangements under Section 8 of RESPA. Ms. Bunting also counsels mortgage companies related to approval, origination, and servicing requirements under the Federal Housing Administration single-family loan program and defends companies in connection with government enforcement proceedings, including RESPA enforcement matters, FHA audits, and CFPB investigations. She frequently publishes articles related to RESPA and FHA issues in industry publications and is a regular speaker at webinars and mortgage and title insurance industry events. -6-
  • 8. MBA Compliance Essentials℠: RESPA I Resource Guide Ms. Bunting received her J.D. in 2003 from the American University, Washington College of Law, and was a Note and Comment Editor for the American University Law Review. Ms. Bunting is licensed to practice law in the District of Columbia and North Carolina. She received her B.A. in Political Science from the University of North Carolina at Asheville in 2000. * * * * ba m K&L Gates LLP’s Financial Services practice area includes one of the largest and most experienced consumer financial services practices in the United States. The Consumer Financial Services group divides its work among transactional, regulatory compliance, government enforcement, licensing and approvals, public policy and governmental affairs, and litigation (including class action defense). With an exceptional depth of knowledge and experience, the group leads the way in assisting clients with navigating the complex array of federal and state laws that regulate their businesses, structuring transactions, and defending private and government actions io at uc ed Our strong presence in Washington, D.C. enhances our ability to work with the various federal agencies that supervise financial service providers. Our close proximity to those agencies is particularly useful in our efforts to obtain agency approvals and defend against administrative enforcement actions. A number of our lawyers have worked at various federal and state agencies including the Department of Justice, the Department of Housing and Urban Development, and state Offices of the Attorney General, and maintain good working relationships with senior regulatory officials and key industry leaders. n. g or Our clients represent a cross-section of the financial services industry, including traditional financial services companies (such as depository institutions, mortgage banks, consumer finance companies, loan servicers, broker dealers, investment banks, money services businesses, prepaid card issuers and sellers, and payment systems providers), as well as non-financial companies that might incidentally provide financial services to their customers (such as homebuilders, retailers, title insurers and agencies, real estate brokers, relocation service companies, and technology companies). We also represent companies that support the consumer financial services industry, but which do not provide services directly to consumers. For example, we represent venture capital firms and hedge funds that invest in providers of consumer financial services, rating agencies, vendor and appraisal management companies, technology vendors to the financial services industry, and document preparation companies. -7-
  • 9. MBA Compliance Essentials℠: RESPA I Resource Guide K&L Gates LLP comprises more than 2,000 lawyers who practice in 48 offices located on five continents: Anchorage, Austin, Beijing, Berlin, Boston, Brisbane, Brussels, Charleston, Charlotte, Chicago, Dallas, Doha, Dubai, Fort Worth, Frankfurt, Harrisburg, Hong Kong, Houston, London, Los Angeles, Melbourne, Miami, Milan, Moscow, Newark, New York, Orange County, Palo Alto, Paris, Perth, Pittsburgh, Portland, Raleigh, Research Triangle Park, San Diego, San Francisco, São Paulo, Seattle, Seoul, Shanghai, Singapore, Spokane, Sydney, Taipei, Tokyo, Warsaw, Washington and Wilmington. ba m g or n. io at uc ed -8-
  • 10. MBA Compliance Essentials℠: RESPA I Resource Guide INTRODUCTION This manual is designed to provide a description of certain core requirements under the Real Estate Settlement Procedures Act (“RESPA”) and information to assist mortgage companies in structuring and testing their business operations to ensure compliance with RESPA. This manual also can be used by mortgage companies as a template to craft policies and procedures addressing compliance with RESPA, as well as training guides for employees and business partners. m As discussed in more detail below, RESPA was enacted to address four primary issues: consumer disclosures, escrow requirements, local recordkeeping and land records, and kickbacks. This manual, however, will focus on RESPA’s anti-kickback requirements and certain other provisions of RESPA that impact the origination of a mortgage loan. Specifically, after providing a brief background regarding the purposes for RESPA and the current regulatory environment, the manual is organized as follows:  Part I of this manual describes RESPA’s overall scope, including the kinds of services and types of transactions to which RESPA applies. This section also highlights the kinds of transactions that are not covered by RESPA. ba  io at uc ed Part II discusses RESPA’s prohibitions against kickbacks and referral fees contained in Section 8(a), RESPA’s prohibitions against the sharing of unearned fees in Section 8(b), the kinds of payments and arrangements that are exempt from Section 8 and, thus, permissible under the law, and the penalties and enforcement risk applicable to violations of Section 8. Part II also includes numerous examples of permissible and prohibited conduct under Section 8 to illustrate the kinds of business activities mortgage companies can pursue or should avoid under RESPA. With regard to those arrangements exempt from Section 8, this section also provides considerable detail on the structuring of affiliated business arrangements and services agreements to comply with RESPA. Part III explains RESPA’s prohibition on a seller’s required use of title insurance companies under Section 9. This section summarizes ways that a seller of residential real estate could violate Section 9.  Part IV addresses the servicing disclosure statement contained in Section 6 of RESPA and required in conjunction with a mortgage company’s receipt of a loan application.  Exhibit A summarizes HUD and CFPB enforcement actions under Section 8.  Exhibit B contains sample provisions for a policy and procedures document addressing compliance with Sections 6, 8, and 9 of RESPA.  Finally, Exhibit C comprises a sample checklist that can be used by a mortgage company’s quality control or compliance personnel to review the company’s activities under RESPA and evaluate the associated risks of such activities under Section 8 and Section 9 of RESPA. g or n.  Note: As indicated, RESPA also requires certain consumer disclosures related to the origination and servicing of federally related mortgage loans, including a HUD-1 Settlement Statement, a Good Faith Estimate, Special Information Booklets, Transfer of Servicing notices, Escrow Account Statements and statements concerning prohibited fees related to disclosures. These disclosures and the substantive requirements related to escrow accounts are not covered in this manual. Revised RESPA-TILA disclosures have not yet been finalized but will be a subject of a forthcoming Compliance Essentials publication soon after they are final. Escrow and servicing disclosures and other servicing-related RESPA requirements will be addressed in the Compliance Essentials Servicing publication. -9-
  • 11. MBA Compliance Essentials℠: RESPA I Resource Guide Finally, many states have enacted laws with similar prohibitions and consumer protections as provided under RESPA. This manual discusses only the federal requirements of RESPA and does not take into consideration any additional laws or regulations that may have been imposed on the state level. It is possible that state laws may prohibit activities that are permissible under RESPA, which means that compliance with federal law may not assure that a mortgage company’s business activities are safe from state law scrutiny. A mortgage company should consult with an attorney if it has any questions related to the legality and other risks associated with its current or proposed business activities under RESPA and/or similar state laws. ba m g or n. io at uc ed - 10 -

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