Title companies are, at their foundation, businesses, and they need profits to survive. Obtaining new clients brings in profits, and one way to get clients is to offer incentives. RESPA prohibits the receipt of kickbacks in exchange for referrals and the splitting of fees when no service is performed. The statute does not prohibit borrower incentives. Some states, however, are taking a different stance.
“In some instances, a title company may want to give the consumer a discounted rate or a coupon,” said Marx Sterbcow, managing partner of Sterbcow Law Group LLC. “It’s not on behalf of anybody. It’s an actual coupon, a consumer incentive. Some state regulators are coming down on these types of incentives and going after title companies.”
Bringing enforcement actions against title companies for offering borrower discounts is “contrary to what Department of Housing and Urban Development (HUD) promoted for more than 30 years,” Sterbcow said.
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