12 U.S.C. § 2607 — Prohibition against kickbacks and un-

Page 1452 TITLE 12—BANKS AND BANKING § 2606 1 See References in Text note below. 1 So in original. § 2606. Exempted transactions (a) In general This chapter does not apply to credit trans- actions involving extensions of credit— (1) primarily for business, commercial, or agricultural purposes; or (2) to government or governmental agencies or instrumentalities. (b) Interpretation In prescribing regulations under section 2617(a) of this title, the Bureau shall ensure that, with respect to subsection (a) of this sec- tion, the exemption for credit transactions in- volving extensions of credit primarily for busi- ness, commercial, or agricultural purposes, as provided in subsection (a)(1) 1 of this section shall be the same as the exemption for such credit transactions under section 1603(1) of title 15. (Pub. L. 93–533, § 7, as added Pub. L. 103–325, title III, § 312, Sept. 23, 1994, 108 Stat. 2221; amended Pub. L. 104–208, div. A, title II, § 2103(b), Sept. 30, 1996, 110 Stat. 3009–399; Pub. L. 111–203, title X, § 1098(5), July 21, 2010, 124 Stat. 2104.) Editorial Notes REFERENCES IN TEXT Subsection (a)(1) of this section, referred to in subsec. (b), was in the original ‘‘section 7(1) of the Real Estate Settlement Procedures Act of 1974’’, and was translated as referring to section 7(a)(1) of that Act to reflect the probable intent of Congress. PRIOR PROVISIONS A prior section 2606, Pub. L. 93–533, § 7, Dec. 22, 1974, 88 Stat. 1727, related to seller or his agent confirming that information concerning an existing residence was disclosed to buyer in writing before a commitment for a mortgage loan was made, prior to repeal by Pub. L. 94–205, § 6, Jan. 2, 1976, 89 Stat. 1158. AMENDMENTS 2010–Subsec. (b). Pub. L. 111–203 substituted ‘‘Bureau’’ for ‘‘Secretary’’. 1996—Pub. L. 104–208 designated existing provisions as subsec. (a), inserted heading, and added subsec. (b). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective on the des- ignated transfer date, see section 1100H of Pub. L. 111–203, set out as a note under section 552a of Title 5, Government Organization and Employees. § 2607. Prohibition against kickbacks and un- earned fees (a) Business referrals No person shall give and no person shall ac- cept any fee, kickback, or thing of value pursu- ant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a fed- erally related mortgage loan shall be referred to any person. (b) Splitting charges No person shall give and no person shall ac- cept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed. (c) Fees, salaries, compensation, or other pay- ments Nothing in this section shall be construed as prohibiting (1) the payment of a fee (A) to attor- neys at law for services actually rendered or (B) by a title company to its duly appointed agent for services actually performed in the issuance of a policy of title insurance or (C) by a lender to its duly appointed agent for services actually performed in the making of a loan, (2) the pay- ment to any person of a bona fide salary or com- pensation or other payment for goods or facili- ties actually furnished or for services actually performed, (3) payments pursuant to cooperative brokerage and referral arrangements or agree- ments between real estate agents and brokers, (4) affiliated business arrangements so long as (A) a disclosure is made of the existence of such an arrangement to the person being referred and, in connection with such referral, such per- son is provided a written estimate of the charge or range of charges generally made by the pro- vider to which the person is referred (i) in the case of a face-to-face referral or a referral made in writing or by electronic media, at or before the time of the referral (and compliance with this requirement in such case may be evidenced by a notation in a written, electronic, or similar system of records maintained in the regular course of business); (ii) in the case of a referral made by telephone, within 3 business days after the referral by telephone,1 (and in such case an abbreviated verbal disclosure of the existence of the arrangement and the fact that a written dis- closure will be provided within 3 business days shall be made to the person being referred dur- ing the telephone referral); or (iii) in the case of a referral by a lender (including a referral by a lender to an affiliated lender), at the time the estimates required under section 2604(c) of this title are provided (notwithstanding clause (i) or (ii)); and any required written receipt of such disclosure (without regard to the manner of the disclosure under clause (i), (ii), or (iii)) may be obtained at the closing or settlement (except that a person making a face-to-face referral who provides the written disclosure at or before the time of the referral shall attempt to obtain any required written receipt of such disclosure at such time and if the person being referred choos- es not to acknowledge the receipt of the disclo- sure at that time, that fact shall be noted in the written, electronic, or similar system of records maintained in the regular course of business by the person making the referral), (B) such person is not required to use any particular provider of settlement services, and (C) the only thing of value that is received from the arrangement, other than the payments permitted under this subsection, is a return on the ownership interest or franchise relationship, or (5) such other pay- ments or classes of payments or other transfers as are specified in regulations prescribed by the Page 1453 TITLE 12—BANKS AND BANKING § 2607 Bureau, after consultation with the Attorney General, the Secretary of Veterans Affairs, the Federal Home Loan Bank Board, the Federal De- posit Insurance Corporation, the Board of Gov- ernors of the Federal Reserve System, and the Secretary of Agriculture. For purposes of the preceding sentence, the following shall not be considered a violation of clause (4)(B): (i) any ar- rangement that requires a buyer, borrower, or seller to pay for the services of an attorney, credit reporting agency, or real estate appraiser chosen by the lender to represent the lender’s interest in a real estate transaction, or (ii) any arrangement where an attorney or law firm rep- resents a client in a real estate transaction and issues or arranges for the issuance of a policy of title insurance in the transaction directly as agent or through a separate corporate title in- surance agency that may be established by that attorney or law firm and operated as an adjunct to his or its law practice. (d) Penalties for violations; joint and several li- ability; treble damages; actions for injunc- tion by Bureau and Secretary and by State officials; costs and attorney fees; construc- tion of State laws (1) Any person or persons who violate the pro- visions of this section shall be fined not more than $10,000 or imprisoned for not more than one year, or both. (2) Any person or persons who violate the pro- hibitions or limitations of this section shall be jointly and severally liable to the person or per- sons charged for the settlement service involved in the violation in an amount equal to three times the amount of any charge paid for such settlement service. (3) No person or persons shall be liable for a violation of the provisions of subsection (c)(4)(A) if such person or persons proves by a preponder- ance of the evidence that such violation was not intentional and resulted from a bona fide error notwithstanding maintenance of procedures that are reasonably adapted to avoid such error. (4) The Bureau, the Secretary, or the attorney general or the insurance commissioner of any State may bring an action to enjoin violations of this section. Except, to the extent that a per- son is subject to the jurisdiction of the Bureau, the Secretary, or the attorney general or the in- surance commissioner of any State, the Bureau shall have primary authority to enforce or ad- minister this section, subject to subtitle B of the Consumer Financial Protection Act of 2010 [12 U.S.C. 5511 et seq.]. (5) In any private action brought pursuant to this subsection, the court may award to the pre- vailing party the court costs of the action to- gether with reasonable attorneys fees. (6) No provision of State law or regulation that imposes more stringent limitations on af- filiated business arrangements shall be con- strued as being inconsistent with this section. (Pub. L. 93–533, § 8, Dec. 22, 1974, 88 Stat. 1727; Pub. L. 94–205, § 7, Jan. 2, 1976, 89 Stat. 1158; Pub. L. 98–181, title I [title IV, § 461(b), (c)], Nov. 30, 1983, 97 Stat. 1231; Pub. L. 100–242, title V, § 570(g), Feb. 5, 1988, 101 Stat. 1950; Pub. L. 102–54, § 13(d)(4), June 13, 1991, 105 Stat. 275; Pub. L. 104–208, div. A, title II, § 2103(c)(2), (d), Sept. 30, 1996, 110 Stat. 3009–400; Pub. L. 111–203, title X, § 1098(6), (7), July 21, 2010, 124 Stat. 2104.) Editorial Notes REFERENCES IN TEXT The Consumer Financial Protection Act of 2010, re- ferred to in subsec. (d)(4), is title X of Pub. L. 111–203, July 21, 2010, 124 Stat. 1955. Subtitle B of the Act is classified generally to part B (§ 5511 et seq.) of sub- chapter V of chapter 53 of this title. For complete clas- sification of this Act to the Code, see Short Title note set out under section 5301 of this title and Tables. AMENDMENTS 2010—Subsec. (c)(5). Pub. L. 111–203, § 1098(6), which di- rected substituting ‘‘Bureau’’ for ‘‘Secretary’’, was exe- cuted by making the substitution for ‘‘Secretary’’ the first time appearing, to reflect the probable intent of Congress. Subsec. (d). Pub. L. 111–203, § 1098(7)(A), inserted ‘‘Bu- reau and’’ before ‘‘Secretary’’ in heading that had been supplied editorially. Subsec. (d)(4). Pub. L. 111–203, § 1098(7)(B), added par. (4) and struck out former par. (4) which read as follows: ‘‘The Secretary, the Attorney General of any State, or the insurance commissioner of any State may bring an action to enjoin violations of this section.’’ 1996—Subsec. (c)(4). Pub. L. 104–208, § 2103(c)(2), sub- stituted ‘‘affiliated business arrangements’’ for ‘‘con- trolled business arrangements’’. Subsec. (c)(4)(A). Pub. L. 104–208, § 2103(d), amended subcl. (A) generally. Prior to amendment, subcl. (A) read as follows: ‘‘at or prior to the time of the referral a disclosure is made of the existence of such an ar- rangement to the person being referred and, in connec- tion with the referral, such person is provided a written estimate of the charge or range of charges generally made by the provider to which the person is referred, except that where a lender makes the referral, this re- quirement may be satisfied as part of and at the time that the estimates of settlement charges required under section 2604(c) of this title are provided,’’. Subsec. (d)(6). Pub. L. 104–208, § 2103(c)(2), substituted ‘‘affiliated business arrangements’’ for ‘‘controlled business arrangements’’. 1991—Subsec. (c)(5). Pub. L. 102–54 substituted ‘‘Sec- retary of Veterans Affairs’’ for ‘‘Administrator of Vet- erans’ Affairs’’. 1988—Subsec. (c)(5). Pub. L. 100–242 substituted ‘‘clause (4)(B)’’ for ‘‘clause 4(B)’’. 1983—Subsec. (c). Pub. L. 98–181, § 461(b), redesignated cl. (4) as (5), added cl. (4) and provisions following cl. (5), as so redesignated, relating to arrangements which shall not be considered a violation of cl. (4)(B). Subsec. (d)(2). Pub. L. 98–181, § 461(c), substituted pro- visions setting forth the liability of persons violating the prohibitions or limitations of this section for provi- sions setting forth liability, in addition to penalties provided in par. (1), of persons violating subsecs. (a) and (b) of this section, plus costs and attorney’s fees. Subsec. (d)(3) to (6). Pub. L. 98–181, § 461(c), added pars. (3) to (6). 1976—Subsec. (c). Pub. L. 94–205 added cls. (3) and (4). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–203 effective on the des- ignated transfer date, see section 1100H of Pub. L. 111–203, set out as a note under section 552a of Title 5, Government Organization and Employees. EFFECTIVE DATE OF 1983 AMENDMENT Amendment by Pub. L. 98–181 effective Jan. 1, 1984, see section 461(f) of Pub. L. 98–181, set out as a note under section 2602 of this title. Page 1454 TITLE 12—BANKS AND BANKING § 2608 EFFECTIVE DATE OF 1976 AMENDMENT Amendment by Pub. L. 94–205 effective Jan. 2, 1976, see section 12 of Pub. L. 94–205, set out as a note under section 2602 of this title. EFFECTIVE DATE Section effective 180 days after Dec. 22, 1974, see sec- tion 20 of Pub. L. 93–533, set out as a note under section 2601 of this title. TRANSFER OF FUNCTIONS Federal Home Loan Bank Board abolished and func- tions transferred, see sections 401 to 406 of Pub. L. 101–73, set out as a note under section 1437 of this title. § 2608. Title companies; liability of seller (a) No seller of property that will be purchased with the assistance of a federally related mort- gage loan shall require directly or indirectly, as a condition to selling the property, that title in- surance covering the property be purchased by the buyer from any particular title company. (b) Any seller who violates the provisions of subsection (a) shall be liable to the buyer in an amount equal to three times all charges made for such title insurance. (Pub. L. 93–533, § 9, Dec. 22, 1974, 88 Stat. 1728.) Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective 180 days after Dec. 22, 1974, see sec- tion 20 of Pub. L. 93–533, set out as a note under section 2601 of this title. § 2609. Limitation on requirement of advance de- posits in escrow accounts (a) In general A lender, in connection with a federally re- lated mortgage loan, may not require the bor- rower or prospective borrower— (1) to deposit in any escrow account which may be established in connection with such loan for the purpose of assuring payment of taxes, insurance premiums, or other charges with respect to the property, in connection with the settlement, an aggregate sum (for such purpose) in excess of a sum that will be sufficient to pay such taxes, insurance pre- miums and other charges attributable to the period beginning on the last date on which each such charge would have been paid under the normal lending practice of the lender and local custom, provided that the selection of each such date constitutes prudent lending practice, and ending on the due date of its first full installment payment under the mort- gage, plus one-sixth of the estimated total amount of such taxes, insurance premiums and other charges to be paid on dates, as provided above, during the ensuing twelve-month pe- riod; or (2) to deposit in any such escrow account in any month beginning with the first full in- stallment payment under the mortgage a sum (for the purpose of assuring payment of taxes, insurance premiums and other charges with respect to the property) in excess of the sum of (A) one-twelfth of the total amount of the estimated taxes, insurance premiums and other charges which are reasonably antici- pated to be paid on dates during the ensuing twelve months which dates are in accordance with the normal lending practice of the lender and local custom, provided that the selection of each such date constitutes prudent lending practice, plus (B) such amount as is necessary to maintain an additional balance in such es- crow account not to exceed one-sixth of the es- timated total amount of such taxes, insurance premiums and other charges to be paid on dates, as provided above, during the ensuing twelve-month period: Provided, however, That in the event the lender determines there will be or is a deficiency he shall not be prohibited from requiring additional monthly deposits in such escrow account to avoid or eliminate such deficiency. (b) Notification of shortage in escrow account If the terms of any federally related mortgage loan require the borrower to make payments to the servicer (as the term is defined in section 2605(i) of this title) of the loan for deposit into an escrow account for the purpose of assuring payment of taxes, insurance premiums, and other charges with respect to the property, the servicer shall notify the borrower not less than annually of any shortage of funds in the escrow account. (c) Escrow account statements (1) Initial statement (A) In general Any servicer that has established an es- crow account in connection with a federally related mortgage loan shall submit to the borrower for which the escrow account has been established a statement clearly itemizing the estimated taxes, insurance premiums, and other charges that are rea- sonably anticipated to be paid from the es- crow account during the first 12 months after the establishment of the account and the anticipated dates of such payments. (B) Time of submission The statement required under subpara- graph (A) shall be submitted to the borrower at closing with respect to the property for which the mortgage loan is made or not later than the expiration of the 45-day period beginning on the date of the establishment of the escrow account. (C) Initial statement at closing Any servicer may submit the statement required under subparagraph (A) to the bor- rower at closing and may incorporate such statement in the uniform settlement state- ment required under section 2603 of this title. The Bureau shall issue regulations pre- scribing any changes necessary to the uni- form settlement statement under section 2603 of this title that specify how the state- ment required under subparagraph (A) of this section shall be incorporated in the uni- form settlement statement. (2) Annual statement (A) In general Any servicer that has established or con- tinued an escrow account in connection with