RESPA was instituted to protect the residential homeowner by requiring a full disclosure of all settlement costs and payments made at the closing ⁴⁸. RESPA bars any business referrals or unearned fees, limits the amounts that are held in borrower’s escrow accounts, and requires that borrowers are informed of mortgage servicing transfers and any lender’s business arrangements with any affiliated service providers⁴⁹.

RESPA Violations

In order to state a claim alleging a violation one must demonstrate, “1) an agreement between the parties to refer settlement service business, 2) transfer of a thing of value, and 3) the referral of settlement service business” ⁵⁰. Yield Spread Premium, a common charge found on every Real Estate Settlement Procedure Act (RESPA), is a fee paid by lender to the mortgage broker for preparing a loan greater than the par rate⁵¹. Yield spread premiums (YSP) are a per se violation of RESPA ⁵². The US Department of Housing and Urban Development (HUD) instituted a two step test to identify if the YSP on a closing settlement statement is a violation of RESPA ⁵³. First, it must be determined if the YSP was earned for services performed ⁵⁴. If not then it qualifies as an illegal kickback and therefore a violation of RESPA ⁵⁵. Second, is to see if the amount received was a reasonable earned fee for the amount of work that was performed, otherwise it is a violation of RESPA ⁵⁶.

⁴⁸ http://www.hud.gov/library/bookshelf12/pressrel/treasrpt.pdf 
⁴⁹ http://www.hud.gov/library/bookshelf12/pressrel/treasrpt.pdf 
⁵⁰ http://www.hud.gov/library/bookshelf12/pressrel/treasrpt.pdf 
⁵¹ http://www.illinoislegalaid.org/index.cfm?fuseaction=home.dsp_content&contentID=1536 
⁵² http://www.illinoislegalaid.org/index.cfm?fuseaction=home.dsp_content&contentID=1536 
⁵³ http://www.illinoislegalaid.org/index.cfm?fuseaction=home.dsp_content&contentID=1536 
⁵⁴ http://www.illinoislegalaid.org/index.cfm?fuseaction=home.dsp_content&contentID=1536 
⁵⁵ http://www.illinoislegalaid.org/index.cfm?fuseaction=home.dsp_content&contentID=1536 
⁵⁶ http://www.illinoislegalaid.org/index.cfm?fuseaction=home.dsp_content&contentID=1536