Truth in Referrals

When you recommend a mortgage broker to a buyer client, which of the following reasons does the client expect to hear?

“I’m referring you to this mortgage broker because . . . .  . .

  • She pays for my Zillow lead subscription.
  • My company pays us for each buyer that we refer to our in-house lender.
  • She works hard to make sure that loans close on time.
  • He gives us Patriots tickets.

If you answered anything but (c), you’re risking a RESPA violation and the loss of your client’s future business.  RESPA (“the Real Estate Settlement Procedure Act”) is a federal law that prohibits giving or accepting money or something of value like free advertising, free tickets to sporting events, and other gifts – for referrals of settlement service providers that relate to a federally related mortgage.  This includes mortgage brokers, lenders, title companies, insurance companies, home inspectors, appraisers, closing attorneys, and others.   Violators of this law risk criminal and civil penalties, including a maximum fine of $10,000 per offense and an imprisonment for a maximum of a year.

When providing referrals, make sure that you are acting in your client’s best interest – not your own.   Your client expects and deserves nothing less.

Do you suspect that RESPA violations are taking place?  Submit a tip to the Consumer Finance Protection Bureau.

Questions?  Please contact the RIAR Legal Department at 401-432-6945 or email

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