With lenders scraping for home loans, charges of illegal kickbacks to real estate brokers for referring borrowers are increasing, according to the Department of Housing and Urban Development.

David R. Williamson, HUD's director of Real Estate Settlements Practices Act enforcement, said the agency was receiving more complaints about illegal fees. He also said the related Respa violations are becoming more brazen and sophisticated.

He attributed the increase in complaints to the end of the refinance boom. A decrease in refi activity has forced lenders "to rely on illegal means to obtain the same performance results" they had last year, he said.

Some lenders blame HUD for "leaving the door open" to increased illegal activity. They say the vagueness and regular changes in Respa rules for controlled business arrangements has lenders making their own uneducated interpretations.

HUD received 400 complaints regarding illegal referral fees last year. So far this year lenders are reporting increases in their areas. One mortgage broker called the illegal activity in his market "unbelievable" and "pretty crazy."

The surge follows the September expiration of HUD's comment period on proposed changes in Respa rules affecting controlled business arrangements.

According to the proposed rule, companies would no longer be able to compensate employees for referring real estate settlement business to a related company.

All other referral fees between real estate agents and lenders are illegal, according to Respa, unless the real estate agent processes some of the loan. Disclosure to the borrower does not legalize referral fees, according to a HUD lawyer.

Mr. Williamson said the complaints about illegal activity seem to be coming mainly from California, Texas, Florida, Illinois, and Michigan. He said the federal government could use more enforcement assistance from state and local governments, especially now that the referral-fee infractions seem to be done less out of naivete than a concerted effort to evade the Respa rules.

Lenders say illegal referrals -- which can bring a year in prison and a $10,000 fine are becoming "rampant" in recent weeks.

Don Henig, president, Island Mortgage Network Inc., Islandia, N.Y., said a real estate broker recently told him he was being paid $6,000 a month by a mortgage bank for referring loans.

"I said to him, 'Don't you understand that you can lose your license [to sell homes],'" Mr. Henig said. "He said, 'Don, everyone is doing it.' And everyone is doing it."

David J. Shirk, owner of Frontier Investment Co., Eugene, Ore., and chairman of the National Association of Mortgage Brokers' Respa subcommittee, said he is receiving more complaints of illegal referral activity.

"Yes, there is a lot of abuse. Yes, it has increased," he said.

Jerry D. Becker, owner of the Mortgage Market, Dublin, Calif., has complained to HUD about several illegal fee arrangements in his area in recent months. He said real estate agents are being paid one-quarter to one-half point for each loan they refer to a lender.

Making Fees A Sure Thing

The latest form of referral fees for real estate agents.

The fees:

A fee structure is agreed on, often 0.5% of the loan.

The package:

The mortgage bank gives the real estate broker a note for $100,000

The payback:

The real estate broker gets a payment on the note from the mortgage bank for each referral.

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