RESPA Section 8 vs Section 9: Kickbacks vs Title Insurance Rules
RESPA Sections 8 and 9 both deal with how settlement service business is steered, and the test likes to put them side by side. Section 8 is about money or other value changing hands for referrals. Section 9 is narrower: it stops a seller from forcing the buyer to use a particular title insurer. Questions describe a payment or a sales contract clause and ask which section it breaks and what the penalty is.
Side by side
| Point | Section 8 | Section 9 |
|---|---|---|
| Statute and rule | 12 U.S.C. 2607; 12 CFR 1024.14 and 1024.15 | 12 U.S.C. 2608; 12 CFR 1024.16 |
| Who it restricts | Anyone who gives or accepts the payment | Sellers of property bought with a federally related mortgage loan |
| What it bans | Kickbacks and referral fees (8(a)); splitting a settlement charge with someone who did no work for it (8(b)) | Requiring, directly or indirectly, as a condition of sale, that the buyer buy title insurance from a particular title company |
| Criminal penalty | Fine up to $10,000, imprisonment up to 1 year, or both | None in the statute |
| Civil liability | Three times the charge paid for the settlement service, jointly and severally | Seller owes the buyer three times all charges made for the title insurance |
| Time to sue | 1 year for a private action; 3 years for the CFPB, HUD or a state official | 1 year (the buyer's action) |
Section 8 in detail
A thing of value is defined broadly: cash, discounts, gifts, trips, free or below-market services, stock or a share of profits (12 CFR 1024.14(d)). The agreement to refer does not have to be written; a pattern of payments tied to the volume of referrals is enough evidence (12 CFR 1024.14(e)). A charge for no work, nominal work or duplicate work is an unearned fee under 8(b) (12 CFR 1024.14(c)). Disclosure to the borrower or the borrower's consent never makes a referral fee lawful.
Section 8 allows (12 CFR 1024.14(g)): payment at fair market value for goods, facilities or services actually provided; an employer paying its own employees for referrals; normal promotional and educational activities not tied to referrals; cooperative brokerage arrangements between real estate agents; and returns on ownership in a properly run affiliated business arrangement.
Affiliated business arrangements
An affiliate referral is lawful only if three conditions are met (12 U.S.C. 2607(c)(4); 12 CFR 1024.15(b)): the referring party gives the written Affiliated Business Arrangement disclosure with an estimate of the charges at or before the referral (within 3 business days for a telephone referral); the borrower is not required to use the affiliate; and the only thing of value received beyond permitted payments is a return on the ownership interest.
| Situation | Result |
|---|---|
| A title agent pays an MLO $100 for each closing the MLO sends | Section 8(a) violation: referral fee |
| A lender pays a real estate agent a 'processing fee' for work the agent did not do | Section 8(b) violation: unearned fee |
| An MLO pays for a real estate agent's open-house ads in return for referrals | Section 8(a) violation: defraying an expense of a referral source |
| A lender pays its own employed MLO a bonus for loans the MLO generates | Permitted: employer payment to its own employee |
| A lender hosts an educational seminar for agents with no referral condition | Permitted: normal promotional and educational activity |
| A broker refers a buyer to a title agency it part-owns, gives the AfBA disclosure at the referral, does not require its use and receives only ownership dividends | Permitted affiliated business arrangement |
| A builder's sales contract requires the buyer to buy title insurance from the builder's chosen title company | Section 9 violation: builder liable to the buyer for 3x the title charges |
Exam trap
Exam takeaway
Work through referral scenarios in our RESPA practice questions, then read the RESPA and Regulation X study note and the ethics and advertising note.
Frequently asked questions
What does RESPA Section 8 prohibit?
Giving or accepting any fee, kickback or thing of value for referring settlement service business, and splitting a settlement charge with anyone who performed no services for it (12 U.S.C. 2607(a)-(b)).
What is the penalty for a RESPA Section 8 violation?
A fine of up to $10,000, imprisonment of up to one year, or both, plus civil liability of three times the charge paid for the settlement service (12 U.S.C. 2607(d)).
What does RESPA Section 9 prohibit?
A seller may not require, as a condition of sale, that the buyer buy title insurance from a particular title company. The seller is liable to the buyer for three times the title insurance charges (12 U.S.C. 2608).
Go deeper: study notes
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