Giving presents is a universal way to show appreciation. When it pertains to banks and their loaning activities, that easy gesture ends up being more nuanced as the capacity for compliance challenges arises. Specifically, Section 8 of the Real Estate Settlement Procedures Act (RESPA) includes prohibitions that should be considered when looking to maintain compliance and prevent potential regulative scrutiny.
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Understanding RESPA Section 8
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RESPA offers consumers with enhanced disclosures of settlement expenses and reduces the costs of closing by eliminating referral charges and kickbacks.1 The legislation, at first passed in December 1974, has actually undergone several modifications and advancements, including Section 8.

RESPA Section 8 forbids specific actions connected with federally associated mortgage loans.2

- RESPA Section 8( a) restricts kickbacks for business referrals connected to or part of settlement services involving federally related mortage loans.
- RESPA Section 8( b) forbids unearned cost plans, i.e., splitting charges made or receieved for settlement services, except for services actually performed in connection with federally related mortgage loan deals.
- RESPA Section 8( c) recognizes certain payments that are not forbidden by Section 8.
These restrictions generally use to any individual, which RESPA specifies as people, corporations, associations, partnerships, and trusts.

RESPA Section 8 restricts anyone from providing or accepting:

- A fee
- A kickback
- A thing of value
pursuant to an agreement or understanding (oral or otherwise), for referrals of company incident to or part of a settlement service involving a federally related mortgage loan. A “thing of worth” is broadly defined in RESPA and Regulation X. 3 It can consist of:

Things of Value:

- Special rates or banking terms
- Things
- Discounts
- Trips
- Money
The Challenge of RESPA Section 8

Under RESPA Section 8( a), gifts and promos usually are “things of value” and, therefore, could, depending on the situations, violate RESPA Section 8( a). If the gifts or promotions are given or accepted, as part of an agreement or understanding, for referral of company event to or part of a genuine estate settlement involving a federally associated mortgage loan, they are prohibited. There is no exception to RESPA Section 8 exclusively based upon the value of the gift or promotion4.

Regulation X allows “regular advertising and educational activities” directed to a referral source if the activities satisfy 2 conditions5:

- The activities are not conditioned on referral of organization