Question

Yvette is a licensed Mortgage Loan Originator. She regularly refers business to ABC Appraisal Company. ABC Appraisal Company normally charges $350 for an appraisal but gives Yvette a $50 discount because of the business she refers to them. Since $350 is the normal fee, Yvette enters that as the cost of the appraisal and pockets the difference. Is this an acceptable practice?

1) Yes. The discount was given to Yvette, not to her customers. The only way it benefits her is if she does it this way.
2) Yes. Yvette has the right to make a profit.
3) No. This violates The Real Estate Settlement Procedures Act, which clearly states that Yvette cannot mark up any services she personally did not perform.
4) No. Yvette cannot charge the retail price of the appraisal because she is not a licensed appraiser.

Answer 1

Yvette's practice of charging her customers the full appraisal fee while receiving a discount violates the Real Estate Settlement Procedures Act, which prohibits unearned fees or kickbacks in the mortgage loan industry.

Step-by-step explanation:

The scenario described with Yvette, a Mortgage Loan Originator, involving a referral arrangement with ABC Appraisal Company, raises ethical and legal questions regarding her practice. According to the Real Estate Settlement Procedures Act (RESPA), it is illegal for a licensed Mortgage Loan Originator to receive any kickback or unearned fee for a referral. In this case, Yvette charging her customer $350 for an appraisal, while only having to pay $300 due to a referred business discount, would constitute marking up a service she did not perform. This is a direct violation of RESPA's prohibitions, as Yvette is essentially pocketing a $50 difference without providing additional services or value. Therefore, the correct answer to whether this practice is acceptable is no, it violates the Real Estate Settlement Procedures Act.