In 1974, Congress enacted the Real Estate Settlement Procedures Act to address problems in the real estate settlement process, including abusive practices that increase costs to homebuyers, and lack of understanding about the settlement process and its costs.  The purpose of RESPA is twofold: RESPA is designed to provide consumers with information about the real estate mortgage transaction and the costs associated with it, as well as to prohibit certain practices, such as referral fees between settlement service providers, that result in higher costs and reduced quality to consumers.

Real estate brokers and agents must comply with RESPA.  Violators of RESPA may receive harsh penalties, including triple damages, fines, and even imprisonment. 

Here are a few examples of what RESPA allows:

•  Allows a title agent to provide, during an open house, a modest food tray in connection with the title company's marketing information indicatin that the refreshements are sponsored by the title company. 
• Allows a home inspection company to sponsor association events when representatives from that company also attend and to post a sign identifying its services and sponsorship of the event.
• Allows you to jointly advertise with a mortgage broker if you pay a share of the costs in proportion with yoru prominence in the advertisement.
• Allows a hazard insurance company to give you marketing materials such as notepads, pens and desk blotters which promote the hazard insurance company's name.
• Allows a title agent to pay for your dinner when business is discussed, provided that such dinners are not a regular occurrence.

Here are a few examples of what RESPA prohibits:

• Prohibits a title company from regularly providing dinner and reception for real estate agents.
• Prohibits acceptance of discounted or free business equipement, such as a free lockbox.
• Prohibits acceptance of reimbursement of the cost for an open house lunch from a mortgage broker who doesn't display any marketing materials at the event.
• Prohibits acceptance of a dinner paid for by a home inspector who doesn't attend the dinner to market his/her services to you.
• Prohibits acceptance of contributions from a title company to offset the cost of a real estate agent's promotional event except to the extent of the value of any marketing done by the title company during that event.
• Prohibits accepting gifts from mortgage brokers, such as paying for greens fees.
• Prohibits a mortgage broker or title company from paying for tickets to a sporting event.
• Prohibits participation in a tropical "get-away" weekend, the cost of which is underwritten by a title company, during which only two hours are dedicated to marketing by the title company and the remainder is recreation.
• DON'T EVER accept payment from a mortgage lender just for taking a loan application.

The National Association of REALTORS® offers more information on RESPA Rules, including news updates and tips on how to comply, at www.realtor.org/respa. 

Disclaimer: the Do's and Don'ts examples listed here are not all-inclusive and small variations in the facts can lead to different outcomes.  They also do not take into consideration any additional regulations that may have been imposed in your state, which may prohibit activites that are permissible under RESPA.  Speak with a RESPA attorney to make sure you comply with all applicable laws.