A principal finding of Congress in the Real Estate Settlement Procedure Act of 1974 is that consumers need protection from "?unnecessarily high settlement charges caused by certain abusive practices that have developed in some areas of the country". The potential problems discussed below may not be applicable to most loan settlements, and discussion is not intended to deter you from buying a home. Most professionals in the settlement business will give you food service. Nevertheless, you may save yourself money and worry by keeping the following consideration in mind:

Kickbacks: Kickbacks and referrals of business for gain are often tied together. The law prohibits anyone form giving or taking a fee, kickback, or anything of value under and agreement that business will be referred to a specific person or organization. It is also illegal to charge or accept a fee or part of a fee where no service has actually been performed. This requirement does not prevent title companies, attorneys, or others actually performing service in connection with the mortgage loan or settlement transaction, from receiving compensation for their work. It also does not prohibit payments pursuant to cooperative brokerage, such as multiple listing service, and referral arrangements or arrangements between real estate agents and brokers.

The prohibition is aimed primarily at eliminating the kind of arrangement in which one party agrees to return part of its fee in order to obtain business from the referring party. The danger is that some settlement fees can be inflated to cover payments to this additional party, resulting in a higher total cost to you. There are criminal penalties of both fine and imprisonment for any violation of these provisions of law and the Government may also seek injunctions against violators. There are also provisions for you to recover three times the amount of the charge for any settlement service, through a private lawsuit. In any successful action to enforce your right, the court may award your court costs together with a fee for your attorney.

In 1983, RESPA was amended to address "controlled business arrangements" which are arrangements in which the party referring a homebuyer to a particular provider of settlement services has a relationship with the provider which involves an ownership or franchise arrangement. Payments made by parties to a controlled business arrangement, such as dividends, may have the same effect as referral fees. Congress recognized a special status for such payments, however, and the law provides that such payments will not be illegal kickbacks or referral fees if the controlled business arrangement is disclosed, a written estimate of charges of the provider is given and the borrower is not required to use that particular provider.

Title Companies: Under the law, the seller may not require, as a condition of sale, that title insurance be purchased by the buyer from the particular title company. A violation of this will make the seller liable to you in an amount equal to three times all charges made for the title insurance.

Fair credit Reporting: There are credit reporting agencies around the Nation which are in the business of compiling credit reports on citizens, covering data such as how you pay your bills, if you have been sued, arrested, filed for bankruptcy, etc. In addition, this file may include your neighbors? and friends? views of your character, general reputation, or manner of living. This latter information I referred to as an "investigative consumer credit report".

The Fair credit Reporting Act does not give you the right to inspect or physically handle your actual report at the credit reporting agency, nor to receive an exact copy of the report. Buy you are entitled to a summary of the report, showing the nature, substance, and sources of the information it contains.

If the terms of your financing have been adversely affected by a credit report, you have the right to inspect the summary of that report free of charge or for a small fee. The accuracy of the report can also be challenged, and corrections required to made. For more detailed information on your credit report rights, contact the Federal Trade Commission (FTC) in Washington, D.C. or the nearest FTC regional office. The FTC Buyer?s Guide No. 7: Fair credit Reporting Act is a good summary of this Act.

Equal credit Opportunity: The Equal credit Opportunity Act prohibits lenders from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided that the applicant has the capacity to enter into a binding contract), because all or part of the applicant?s income derives from any public assistance program, or because the applicant has in good faith exercised any right under the Consumer credit Protection Act. If you feel you have been discriminated against be any lender, you may have a private right of legal action against that lender and you may wish to consult an attorney; or you may wish to consult the Federal agency that administers compliance with this law. Inquire of the lender regarding the identity of that agency. You may also contact your regional Board of Governors of the Federal Reserve System about rights under this Act.

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