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the appropriate column and the individual charges on the line following the word "to." Lines 1108-1110. Enter the total charge for title insurance (except for the cost of the title binder) on line 1108. Enter on lines 1109 and 1110 the individual charges for the Lender's and owner's policies. Note that these charges are not carried over into the borrower's and seller's columns, since to do so would result in a duplication of the amount in line 1108. If a combination Lender's/owner's policy is available show this amount as an additional entry on line 1109 and 1110.

Lines 1111-1113. These lines are for the entry of other title charges not already itemized. Examples in some jurisdictions would include a fee to a private tax service, a fee to a county tax collector for a tax cer

tificate, and a fee to a public title registrar for a certificate of title under a Torrens Act. Show the attorney's fees for legal representation on lines 1111-1113.

Lines 1303-1305. Enter on these lines any other settlement charges not referrable to the categories listed above on the form, which are required to be stated by Regulation X. Examples may include structural inspections or pre-sale inspection of heating, plumbing, or electrical equipment. These inspection charges may include a fee for insurance or warranty coverage.

Line 1400. Enter the total settlement charges paid from borrower's funds and seller's funds. These totals are also entered on lines 103 and 502, respectively, in sections J and K.

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Chapter XX-Off. of Ass't. Sec. for Neighborhoods, Etc..

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App. A

Form Approved
OMB NO. 63-R-1501

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12

8. Mortgage Insurance Case Number:

C. NOTE: This form is furnished to give you a statement of actual settlement costs. Amounts paid to and by the settlement agent are shown. Items marked “(p.o c.)” wer. paid outside the closing; they are shown here for informational purposes and are not

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APPENDIX B-FACTS AND COMMENTS ON
SECTION 8 WHICH PROVIDE FURTHER
CLARIFICATION OF REGULATIONS

The following illustrations provide additional guidance on the meaning and coverage of Section 8 of RESPA. While particular illustrations may refer to particular providers of settlement services, such illustrations are applicable by analogy to providers of settlement services other than those specifically mentioned. It should be noted that other provisions of Federal or state law may be applicable to the practices and payments discussed in the following illustrations.

1. Facts. A, a provider of settlement services, maintain and abnormally large balance in a non-interest bearing account with B, a mortgage lender, pursuant to an understanding that B will refer borrowers of Federally Related Mortgage Loans to A for the purchase of settlement services in connection with the settlement of such loans.

Comments. Allowing B to use the deposited funds at no interest appears to be a thing of value given by A to B pursuant to an agreement or understanding that business incident to a real estate settlement shall be referred to A in violation of Section 8 of RESPA. The maintenance of any accounts reasonably needed by A in the normal course of its business would not be a violation of Section 8.

2. Facts. B, a lender of Federally Related Mortgage Loans, pays A, a real estate agent, a fee of $25 per transaction purportedly for services performed such as arranging for B's appraiser to visit the property. The purported services for which the fee is paid are services that real esstate agents frequently perform as part of their services and the fee is really intended to enable B to compensate A for referring potential borrowers to B.

Comments. Both A and B are in violation of Section 8 of RESPA, since the fee is being paid in compensation for the referral of business rather than for legitimate services actually rendered by B on behalf of A.

3. Facts. A, a provider of settlement services, provides settlement services at abnormally low rates or at no charge at all to B, a builder, in connection with a subdivision being developed by B. B agrees to refer purchasers of the completed homes in the subdivision to A for the purchase of settlement services in connection with the sale of individual lots by B.

Comments. The rendering of services by A to B at little or no charge constitutes a thing of value given by A to B in return for the referral of settlement business and both A and B are in violation of Section 8 of RESPA.

4. Facts. B, a Lender, encourages persons who receive Federally Related Mortgage Loans from it to employ A, an attorney, to

search title and perform related settlement services in connection with their transaction. B and A have an understanding that in return for the referral of this business A will provide legal services to B or B's officers or employees at abnormally low rates or for no charge.

Comments. Both A and B are in violation of Section 8 of RESPA.

5. Facts. A, A provider of settlement services, pays referral fees to persons who refer settlement business on commercial real estate to A.

Comments. While commercial transactions are not covered by RESPA, the payment of such referral fees would be a violation of Section 8 if they involve indirect compensation for the referral of settlement business covered by RESPA.

6. Facts. A, a real estate broker, obtains all necessary licenses under state law to act as a title insurance agent. A refers individuals who are purchasing homes in transactions in which A participates as a broker to B, a title company, for the purchase of title insurance services. A fills out a simple form but performs no other services in connection with the issuance of the title insurance policy. B pays A a commission for the transactions.

Comments. The payment of a commission by B to A under circumstances where no substantial services are being provided by A to B is a violation of Section 8 of RESPA.

7. Facts. A, a "mortgage originator" or "mortgage broker", receives loan applications and refers borrowers to lenders for a fee.

Comments. If A performs services such as obtaining credit and appraisal information or preparing an application for mortgage insurance or guarantee which are of value to the Lender paying the fee, without reference to the referral value of such services, and the fees paid bear a reasonable relationship to the value of such services, the payment of such a fee would not be in violation of Section 8 of RESPA.

8. Facts. A, a title insurance company, provides among its other services an "insured Closing Service Letter". Under this letter, for which no separate or additional charge is made, the company agrees to provide indemnity against loss due to certain fraudulent or negligent acts of the company's policy-issuing agents or approved attorneys in complying with closing instructions and in conducting the closing of any transaction in connection with which a policy of title insurance is to be issued by A.

Comments. Where A has provided such an Insured Closing Service Letter to a specified person and the protection afforded thereby is effective without regard to whether the particular case was referred to A by the person receiving protection under such

letter, the provision of the letter would not be pursuant to an agreement or understanding that settlement services be referred, and therefore not in violation of Section 8.

9. Facts. A, a service corporation, is a title insurance agent for B, a title insurance company. The search and examination of title, in connection with applications for title insurance policies prepared by A, are performed by employees of B. Employees of B also make any determinations as to the insurability of title. A issues title insurance policies on behalf of B and receives a commission equal to the amount paid other title insurance agents in the community, including other agents of B, who perform the title search and examination as well as prepare and issue the title insurance policy.

Comments. While A may be performing some real service for B, the fact that the amount of the commission received by A is equal to the commissions customarily paid to full-service title insurance agents who perform substantially greater and more valuable services indicates that the commission paid by B to A is really intended to compensate A for the referral of business. The amount by which the commission exceeds the reasonable value of the services rendered by A to B would be a referral fee prohibited by Section 8 of RESPA. Section 8 does not prohibit variations in the amount of commissions that may be paid, nor does it require that the quantum of services rendered be identical in all cases, so long as ser

vices significant to the issuance of a title insurance policy are rendered and the amount of the commission bears a reasonable rela tionship to the services rendered.

10. Facts. A, a real estate broker, refers title business to B, a company that is a li censed title agent for C, a title insurance company. A is part owner of B. B performs the title search and examination, makes determinations of insurability and issues a policy of title insurance on behalf of C, for which C pays B a commission. B pays annual dividends to its owners, including A, based on the relative amount of business each of its owners refers to B.

Comments. While the payments of a commission by C to B is not a violation of Section 8 of RESPA, if the amount of the commission constitutes reasonable compensation for the services performed by B for C, the payment of a dividend or the giving of any other thing of value by B to A that is based on the amount of business referred to B by A constitutes a violation of Section 8. Similarly, if the amount of stock held by A in B (or, if B were a partr.ership, the distribution of partnership profits by B to A) varied in proportion to the amount of business referred or expected to be referred, or if B retained any funds for subsequent distribution to A where such funds were gener. ally in proportion to the amount of business A referred to B, such arrangements would constitute violations of section 8.

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