- Up to a $10,000 fine, or
- Imprisonment for up to one year, or both
- Treble (triple) damages for any actual damages (closing costs)
- Court costs, and reasonable attorney's fees
- Prohibition of kickbacks and unearned fees [12 USC 2607]
- Sellers requiring a specified title company [12 USC 2608]
The second one, although not directly applicable to the real estate professional, is still important. As a fiduciary (trusted adviser), you have a duty to disclose what you know to your client. Don't let your sellers make the sale conditional on a certain title insurance company, or they will be opening themselves up to treble (triple) damages for the amount paid for the title insurance, and you will have one very unhappy client.
As you often hear, "certain exclusions may apply" which pertains to RESPA as well. There are certain real estate transactions and mortgages that are not covered by RESPA, but to be safe the $50 kickback is hardly worth the risk.
2 comments:
Nice post.
I think further clarification should be made regarding fiduciary responsibilities. As an attorney, you are a fiduciary and are probably well aware of the far reaching responsibilities of fidelity. A fiduciary must always represent their client's interest above all others, ESPECIALLY their own (self dealing).
Being a fiduciary does not just mean disclosing conflicts of interest. In fact, a fiduciary's first job is to avoid engaging in a relationship that is plagued by a conflict.
The worst conflicts are those that go to the duty of loyalty. Things like dual agency and self dealing. Then there are the duties of accounting, due diligence etc...
Now add in the licensing scheme that creates a hiearchy between the broker's license and the sales license. The broker is responsible for supervising their agents, including without limitation the adherence of fiduciary duties.
So what happens when a broker trains their agents to use their in-house title or mortgage company? When the broker tells the agent that the only way to keep their fees low or to help out the company is to use the in-house services? What happens when the broker hands out a list of objections and how to address them if the client wants the agent to help them find a title or mortgage provider outside the "family." What happens when the in-house title company is expensive?
Disclosure is not the standard. In fact, in most class actions on this topic, once you prove a prima facie case that there did exist a conflict of interest, the burden of proof switches to the defendant to prove that they obtained informed consent. Not an easy standard.
When a fiduciary takes a kickback, it also may fall under the State's commercial bribery laws (depending on the State).
The point is, RESPA is just a minimum standard when it comes to fiduciaries. Fiduciaries are going to be held to a much much higher standard.
Doug Miller
www.realestateethics.blogspot.com
Doug
Thanks for the comment. You have brought up a lot of good points, and future topics for the blog. I would be interested to know how you found my blog within 12 hours of being up. I hope you keep reading and I will take a look at your blog soon.
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