Penalties for Violations of RESPA and Regulation X


Rules and regulations which prohibit kickbacks, referrals, and fee splitting, are subject to RESPA’s most severe penalties including fines of up to $10,000 and one year in prison.  More details can be found in Violations of Section 8.

Section 6 of RESPA addresses loan servicing and allows consumers to file individual or class actions against loan servicers for RESPA violations.  In individual actions, loan servicers may be liable for damages.  If a pattern or practice of noncompliance with the servicing requirements of RESPA exists, the loan servicer can be liable for additional penalties of up to $1,000.  In class actions, damages may not exceed $1,000 for each member of the class and total damages may not exceed $500,000 or 1% of the net worth of the servicer.

Failure to submit an initial or annual escrow statement in compliance with Section 10 of Regulation X can result in a civil penalty of $75, with a limitation of $130,000 on the penalty imposed on one servicer for violations occurring within a consecutive 12-month period.  However, if a loan servicer intentionally disregards the requirements of Section 10, penalties are $110 for each violation, with no limit on the total amount of the penalty.

Penalties for originators seem severe while those for servicers are much less.

 

2 Responses to Penalties for Violations of RESPA and Regulation X
  1. marty a. garrett
    May 3, 2014 | 1:17 pm

    Gee,parking ticket basically, the consumer should receive more in damages for violations, I am trying to modify my house loan, they gave me an offer in which there is no information on interest, terms of any kind and say after you make 3 payments of $1000 (called a trial period plan). we will send you a loan modification offer with the terms,and it says the money will be used first to meet a payment in the rears,and if you don’t take the loan modification any money given in the trial period plan will be kept.

    I asked for further explanation and submitted proof that my wife’s VA school benefits were not taxable. it states on the form that it will raise the income by 25% on that amount to qualify for different programs. The lawyer for the mortgage company said he sent it. The mortgage company did not respond to this inquiry at all. They violated the respa rules by not responding and took my modification off the table and said I have to resubmit.

    I brought the rules up which said they have to honor the rules, they used an excuse that was another servicer’s offer, but all they had done was transfer the servicing to Florida’s office. The mortgage co. gave til 4/1/2014 to take the offer. It also said ironically on the coupons to make the payments , ” that any loss mitigation offer would still be valid after the appeal, or error .,but could be adjusted due to interest or other expenses. They, the mortgage company and their lawyer blamed it on Fannie Mae’s rules and said I had to reapply. In conclusion Fannie Mae doesn’t have to follow the RESPA rules. Ironically on the one of the letters it gave me til 5/4/2014 to submit evidence for the loan modification and the offer was withdrawn on 4/1/14 because I didn’t make the payment before the deadline to submit evidence for the modification trial payment plan. This is very troubling because if they don’t follow what they gave you in writing how can you take their verbal answers. This particular mortgage company has had a large settlement to make more modifications available as their punishment imposed but seems their to big to fail attitude still prevails.

    • Steve Myers
      May 9, 2014 | 4:51 pm

      Hi Marty,

      I am sorry to hear that you are having that much trouble getting a modification in today’s market. Doesn’t sound right.

      You may want to file a complaint with the Consumer Financial Protection Bureau. I have directed others there and they have said they got fairly quick results. Their website is http://www.consumerfinance.gov/complaint/

      Good luck!

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