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HUD recently clarified its rule that rebates are permissible under RESPA as long as they are reported on the HUD-1 form. HUD explains that rebates are permitted by RESPA  .
RESPA stands for the Real Estate Settlement Services Procedures Act. RESPA is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD.
Pursuant to RESPA Section 8, "No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person." This means that any "Flat Fee MLS Home Selling Broker" who refers business to a settlement service provider, such as a mortgage broker or title insurance company, in return for something of value, as defined by HUD, could potentially be in violation of RESPA Section 8 and therefore subject to treble damages.
RESPA's purpose is twofold:
- to provide consumers with information about the real estate mortgage transaction and the costs associated with it
- to prohibit certain practices, such as referral fees between settlement service providers, that result in higher costs and reduced quality to consumers
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