Mortgage Info for Homes and Small Business Financing

Penalties for Violations of RESPA and Regulation X

Rules and regulations that prohibit kickbacks, referrals, and fee splitting, are subject to the most severe penalties for violation of RESPA including fines of up to $10,000 and one year in prison.  Find more details in RESPA Requirements and Violations of Section 8.

Penalties for Violations of RESPA

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 exists, the loan servicer can be liable for additional penalties for violations of RESPA 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.  There is 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.

My team at MetFund looks forward to combining skills and resources to help you achieve your real estate financing goals.  Call Steve today to get started!
703-622-8218

 

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11 Responses to Penalties for Violations of RESPA and Regulation X

  1. 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.

    • 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!

      • DONT EVEN BOTHER WITH CFPB!!! THEY HAVE NOT DONE A SINGLE THING TO HELP US WITH BLATANT NJ RESPA VIOLATIONS. ACTUALLY, NEITHER DID NJDOBI. WHAT A BUNCH OF IDIOTS THOSE PEOPLE ARE! GET YOURSELF A WELL VERSED ATTORNEY AND DONT WASTE YOUR TIME FOLLOWING THE SYSTEM….THE SYSTEM IS BROKEN BEYOND REPAIR. SAD, BUT TRUE

        • Wow!, Michelle, this is very distressing to hear. Would you be willing to provide us with a few details of what happened?

          • Steve, email me outside of this forum and I will gladly explain.
            michelle66769gmail.com

  2. Our bank was found guilty of 5 RESPA violations. This was in a county court in Kansas. These violations were all regarding qualified written requests. They tried to steamroll us. We had a house fire and were not in foreclosure. What are damages available under this statute.
    Thank You

  3. CFPB ! What a crock, or should I say crooks! Another political agency that does absolutely nothing. They are not there for the “Consumer”. They will do nothing for you. They will investigate wrong doing by the mortgage company/servicer, and potentially fine them if they have done wrong, but the consumer gets nothing, other than knowing that the mortgage company/servicer did wrong. Another wasteful government entity, that you and I are paying for. The amount of the fines they can impose are so ridiculously low, that they don’t even come close to funding the organization. You and I are doing that.

    • Hey Troy,

      I feel your pain. I know the system is not perfect. They are working on it.
      Thank you for adding your voice. By continuing to speak out we have hope of wrestling control of the financial markets from the big banks and Wall Street and making them fully responsible for their illegal practices.

      There have been some enormous aggregate penalties assessed but as you suggest, the banks are so big it’s become just a cost of business to them.

      Hopefully, they at least got your situation corrected and prevent it from happening again to you or anyone else.

  4. Our current lender has been collecting $3900 a year in property taxes into our impound acct. since Nov. 2015. Despite us having documentation from the county assessor that our taxes are only $2400 a year.
    We have called, faxed, sent emails, sent requests to review our impound acct via thier website, and they will not respond. We are now forced to refi our mortgage in order to fix this. What makes me mad is it is going to cost us $4000 to refi. IS there a way we could sue the current lender and force them to pay the refi fees? This has been so stressful.

    • Hi Angela and Brian, thanks for your question.

      Let me begin by saying how sorry I am that you’ve had to put up with this nonsense. The discrepancy between the two amounts is large. Any lender that maintains an escrow account is required to share an escrow disclosure with the borrower on an annual basis. This should disclose the monthly collected amount from you and any and all disbursements made on your behalf.

      Are you getting a monthly account statement from the lender? Does your online account have your correct address? Sound crazy? Crazier things have happened. Have you confirmed with your county’s taxing authority that they are indeed receiving the tax payments from the lender and the amount received. What other items are included in your escrow account? Hazard insurance and mortgage insurance are two other typical items collected and disbursed.

      If your lender has truly wronged you then you may be able to sue in small claims court, if available. Otherwise, it may be cost prohibitive. If they have never sent you you an annual escrow disclosure you should file a complaint with your state and the Consumer Financial Protection Bureau (CFPB) at the least. The CFPB complaint page can be found here.

      If you do have a copy of a recent monthly statement, I would review it with no obligation. Send me an email with an attachment.

      I hope you get some satisfaction.

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