Did you know that it’s against the law for people involved in the buying and selling of real estate, such as real estate agents, lenders, mortgage brokers, construction companies, title companies, home inspectors, etc., to receive kickbacks and unearned fees?

To protect consumers, Congress passed the Real Estate Settlement and Procedures Act (RESPA). This act states: “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.” What this means is, real estate agents, lenders, mortgage brokers, etc., cannot engage in activities that provide undisclosed kickbacks and referral fees to each other in order to increase the mortgage loan closing costs.

While it’s against the law for people in the mortgage industry to be involved in kickback schemes, unfortunately, that doesn’t mean these arrangements don’t happen. As a home buyer, you need to be aware of these kickback ploys and know how to avoid them.

Some common fraudulent activities involving real estate closings include:

• Home builders requiring you to use a certain lender or title company or you have to pay more money for your home.
• Lenders who mark up their closing fees for services such as appraisals, credit reports, etc.
• Lenders who impose an additional fee if you don’t use a particular lender or title company.
• Lenders failing to disclose settlement costs upfront.
• Some mortgage brokers who intentionally advertise lower fees to get your business. But when closing comes, they increase settlement costs.
• Title agents kicking back a portion of the title fee to the real estate agent or lender who referred the business.
• Realtors receiving tickets, gift certificates, free training or other prizes from loan officers in exchange for referrals.

Here are some things you can do to avoid being scammed in a kickback plot:

• Make sure you know what fees you’ll be paying. In fact, within 3 days of applying for your mortgage, your lender must provide you with a Loan Estimate Form, which breaks down all of the fees. You must provide your approval before they can proceed with your loan application. Then, at least 3 days prior to closing, your lender is required to provide you with a Closing Disclosure Form that details the costs paid by the buyer, seller and third parties.
• Ask questions if you don’t understand why you’re paying a certain fee and the amount.
• If you think you’re getting scammed, contact the U.S. Department of Housing and Urban Development (HUD) at www.hud.gov and report it.

If you’re looking to buy a new home and want to work with a reputable mortgage broker, contact the loan specialists at Grandview Lending in Indianapolis. Grandview Lending’s business is based on family values like honesty, integrity and sincerity. We don’t engage in “bait and switch” closing costs schemes; and we don’t accept kickbacks for our services. If you have any questions regarding the fees you’re being charged, just ask our Senior Mortgage Specialists for an explanation.

When you work with Grandview Lending, you’ll have peace of mind knowing you’re working with someone who is trustworthy. But don’t just take our word for it, click here to read what our customers have to say about us.

Photo credit: 123RF / Olga Traskevych - modified