Are there any fees a lender is not allowed to pay?

Prohibited payments by Mortgagees include:

A. Unearned fees.  A Mortgagee is not permitted to pay any fee, compensation, or thing of value:
1. Other than for services actually performed.
2. That is a kickback.
3. Above that actually paid for the service.
4. To any party for referring the loan (a finder's fee).
5. To a party that has or will receive other payment for the service, except in the case of a commission for selling hazard insurance policy at the request of the borrower.
6. That is prohibited by the Real Estate Settlement Procedures Act (RESPA).

B. Advances. Advancing funds in anticipation of commissions on sales to be financed with FHA-insured mortgages is prohibited.

C. Loans. A Mortgagee may not make below-market or no-interest loans to a real estate broker, real estate agent, mortgage broker, packager, builder, or any other party from whom the Mortgagee accepts proposals involving FHA-insured mortgages.

For additional information see Handbook 4000.1 I.A.6.h. & II.A.1.a.ii.(B) at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-04825