Federal Mortgage-Related Laws Practice Test

In this scenario, both the attorney and the lender have violated the Real Estate Settlement Procedures Act (RESPA), which prohibits certain types of kickbacks and referral fees in real estate transactions. RESPA was established to protect consumers from unnecessary increases in the cost of settlement services due to kickbacks or referral fees that may not align with actual services rendered.

The arrangement described involves the lender making car loan payments on behalf of the attorney in exchange for client referrals, which constitutes a kickback for the referral of business. This type of transaction violates RESPA's restrictions on giving or receiving anything of value in exchange for the referral of settlement services related to federally related mortgage loans.

Since both parties are actively participating in this agreement—where one party is providing something of value (car loan payments) in return for referrals—the actions of both the attorney and the lender are in violation of RESPA's provisions. Therefore, both are held accountable under the statute for engaging in this illicit arrangement.