by Andrew Walden
Transaction coordination services are prohibited 'kickbacks'. That's the message licensed Hawaii realtors are receiving from escrow and title companies.
Reacting to the new rules, one Maui real estate broker says:
"I just came back from an educational meeting sponsored by Realtor's Association of Maui (RAM) where the lawyers and the reps of a variety of escrow/title companies told a crowd of about 60 mostly residential realtors that they would be more strictly interpreting certain regulations.
"The cutbacks on food and beverage and marketing probably long overdue, but I think it's been at least a decade since I or any agent or broker prepared a time line or ordered a condo doc, or similar paperwork, that in the past had been a service provided by escrow. Now they're saying not only won't they do it any more but they won't give any advice on how the Realtors can now years later once again do it themselves.
"The real estate people are particularly unhappy about the ending of furnishing timelines, because this is the basic road map to what each side of a transaction has to perform and by when.
"In real estate it's making waves. These RESPA changes will make a big difference in how the real estate business is conducted locally going forward, and the penalties are heavy duty including jail time."
The federal Real Estate Settlement Procedures Act Section 8 has been a source of confusion for years, but the Obama administration's newly formed Consumer Finance Protection Bureau is imposing its own interpretation.
A December 1 letter to the Hawaii Association of Realtors from the Hawaii Land Title Association and the Hawaii Escrow Association lays down the law:
With the advent of regulation by the Consumer Financial Protection Bureau, the members of the Hawaii Land Title Association arid Hawaii Escrow Association have renewed their commitment to compliance with the Real Estate Settlement Procedures Act. As you know, Section 8 of RESPA states, in part, that "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."
The undersigneds' commitment to compliance with the law includes not participating in the following activities:
- providing food, beverages, entertainment, transportation or free services and amenities in connection with Broker-sponsored functions, including open houses and awards events;
- providing or printing marketing materials such as postcards and flyers, and postage, at anything less than market value charges;
- providing door prizes or gifts, with the exception of promotional objects of nominal value (l.e., less than $25) with permanently-affixed company logos;
- providing transaction coordination services by escrow or title company employees (e.g., timeline creation, ordering condominium document disclosure packages, ordering termite reports and surveys, furnishing closing/tabbed folders, etc.).
PDF: RESPA letter attached dated Dec 2014
HUD: Is timeshare covered by RESPA? YES
Lexology: CFPB enforces RESPA referral prohibition against mortgage lender