Title Companies and RESPA ViolationsDaniel Dobbs2022-12-17T08:16:08-08:00
Gwen can be reached at (760) 796-7777.
This post is courtesy of Gwen and Dennis Field (as of May 3rd, 2022) both joined Stewart Title.
Gwen is a guest contributor and she is focused on Wildfire Safety in San Diego. Gwen can be reached at (760) 796-7777
Agents can use any of the below as marketing pieces for farming or give to prospective buyers and homeowners. They can be reached at (760) 796-7777.
Website: Stewart.com..Email address: Titlegeeks@stewart.com
Other contributions are:
AlertWidfire: Newest fire spotter on the Lookout: You!
A Guide to Prop.19
Download a Family Disaster Plan Checklist
Regulations out for title reps, directly affect agents; if you receive illicit services from a title rep(s) you will also be held in violation of RESPA.
Any title rep caught in a RESPA violation scheme is suspended, and the participating agent’s name and licensing number forwarded to the DRE commissioner for further review.
According to the online DRE newsletter enforcement of RESPA is a top priority.
Penalties for RESPA can result in an agent’s, license suspension or forfeiture /suspension, loss of Commissions and a $10k fine.
In an extreme case / or for repeat offenders: prison time can be imposed.
The following is “Q and A” of the Do’s and Don’ts
1) Can a title rep sit an open house without an agent present! NO!
2) SB133 What changed with this law?
Senate Bill 133 prohibits title companies & their reps from paying for any food, beverage or entertainment.
All the prior prohibitions on other types of rebates remain in place.
3) Are there other expenses that specifically prohibited under this law?
Yes. The law makes it clear: Advertising or paying for advertising in any newspaper, newsletter, magazine or publication produced by or on behalf of a person resulting in a direct / indirect subsidy violates the law.
4) What is permitted?
Limited promotional items are permitted. These items must have a permanently affixed title company logo and cannot have a value of more than $10.
Gift certificates and gift cards are not promotional items and violate RESPA.
5) Can receiving a rebate be a crime?
YES! Commercial bribery is a crime under the California Penal Code.
A real estate licensee who corruptly receives compensation prohibited under the Real Estate Law for the referral of title business may be charged with the crime of commercial bribery.
6) Can giving a rebate be a crime?
A title marketing representative who corruptly violates the anti-rebate provisions of the Insurance Code by paying a commission, compensation or other consideration to a real estate licensee may also be charged with the crime of commercial bribery.
7) Is providing educational materials permitted?
Yes, but only if the educational materials exclusively relate to the business of title insurance & only if CE credits aren’t offered to the recipient.
8) Do the limitations on expenses apply only to title representatives?
No. The prohibited expenditures in the law apply to title insurers, underwritten title companies, controlled escrow companies & all title company employees, including title marketing reps.
However, the registration/certification program created in SB133 only applies to title marketing representatives; the DRE has it’s own regulations.
9) What happened to the law allowing reasonable expenditure for food, beverages, entertainment and educational programs so long as it was a permitted IRS expense?
Those provisions of law have been repealed by Senate Bill 133.
10) What about existing prohibitions on rent, equipment and other items?
Those continue to be prohibited.
11) Is there a conflict between prohibited title company’s expenditures and what real estate licensees are permitted to receive?
Under the Real Estate Law, real estate agents and brokers, individually and collectively in groups or associations, can receive meals and beverages.
Title companies are prohibited from providing any such expenditures under the Title Insurance Law, but are permitted to offer education and/or education material regarding title and escrow, as well as promotional items (worth less than $10, and with a permanently-affixed logo.
12) Are title marketing representatives now separately regulated?
Yes. Anyone who is employed by a title insurer, underwritten title company or controlled escrow company whose primary duty is to market, offer, solicit, negotiate or sell title insurance now has to get a certificate of registration as a title marketing representative from the Dept. of Insurance.
13) What happens if a registered title representative violates the law?
There will be a hearing to determine if the title marketing representative violated the law after the Department of Insurance brings an administrative action against a title marketing representative.
14) If the Dept. imposes a monetary penalty, can the title company pay the penalty? No.
The title company cannot pay the penalty or give the title marketing representative the funds to pay the penalty. The penalty must be paid from the personal funds of the title marketing representative.
15) Will the Department of Insurance track title marketing representatives?
Yes. If a title marketing representative’s employment is terminated then the title company must notify the Dept. of Insurance within 30 days.
If a title marketing representative is hired by a different company then the company has 30 days to notify the Dept. that the title marketing representative was hired.
16) Why is this law so important to title companies & title reps?
Title companies can be fined up to 5 times the amount of the expense.
Title reps can have their license suspended/ revoked and be personally fined for violating the law.
12404. (a) It is unlawful for any title insurer, underwritten title company or controlled escrow company to pay, directly or indirectly, any commission, compensation, or other consideration to any person as an inducement for the placement or referral of title business.
Actual placement or referral of title business is not a precondition to a violation of this section, whether the violation is or is not a per se violation pursuant to subdivision (c).
Gwen can be reached at (760) 796-7777.