What RESPA is for
RESPA polices the settlement process: it keeps referral money out of the transaction and keeps servicers from hoarding escrow money.
Section 8 and kickbacks
No one may give or accept a fee, kickback or thing of value for the referral of settlement-service business. The civil remedy runs to the person charged and is three times the amount of the settlement charge, plus court costs and attorney's fees. A title company paying a broker $1,200 per referred closing exposes both to 3 × $1,200 = $3,600 per borrower. Single damages of $1,200 is the wrong measure. The $10,000 figure is the maximum criminal fine, paid to the government and possibly joined by up to one year in prison, not paid to the borrower.
There is a genuine exception for cooperative brokerage and referral arrangements between real estate licensees — but it covers licensee-to-licensee arrangements only. A payment from a title company to an agent is not covered.
Escrow limits
A servicer may collect 1/12 of estimated annual taxes and insurance each month, plus a cushion of no more than 1/6 of annual disbursements, which equals two months. Taxes of $3,600 plus insurance of $1,200: the monthly deposit is $400, and the maximum cushion is ($3,600 + $1,200) ÷ 6 = $800. A $1,200 cushion is three months and violates the rule; $2,400 is six months. The cushion is two months of escrow disbursements, not of PITI. Any escrow surplus of $50 or more must be refunded within 30 days if the borrower is current.
Coverage and exemptions
RESPA applies to federally related mortgage loans on 1-4 family residential property. It exempts temporary financing such as construction loans and bridge or swing loans, unless the loan is converted to or used as permanent financing. A six-month bridge loan secured by the borrower's existing home is therefore exempt. A 30-year FHA purchase loan and a 15-year conventional loan on a duplex are fully covered. A refinance is covered too, even though the special information booklet is not required for it.