WASHINGTON - The drive to control costs in a shrinking home mortgage market is leading some lenders to violate consumer protection laws, according to the Federal Deposit Insurance Corp.

In a five-page letter to bankers last month, the FDIC said it violates the Real Estate Settlement Procedures Act, or Respa, to pay vendors for work on new loans while accepting free services on existing ones.

"The problem is throwing the existing loan service into the contract at a zero fee," said Stephen M. Cross, the FDIC's director of compliance and consumer affairs. "It is a thing of value in return for committing to provide all your future business."

Though five problems related to Respa were cited in the agency's Nov. 17 letter, Mr. Cross said the free-service problem impelled his sending of the letter. Before their next exam, Mr. Cross said, bankers should review vendor contracts, including those for application processing, tax preparation, or flood-hazard analysis.

He characterized violations to date as "innocent" and "inadvertent."

"In most of the cases we've seen, there is nothing nefarious intended," he said. "But the language of Respa is relatively clear: You may not receive for free a thing of value in return for a referral of future business."

Now that bankers have been notified, he said, violators will be referred to the Department of Housing and Urban Development, which enforces the law. Violations of Respa can incur up to a $10,000 fine and a year in jail.

The violations cited by the FDIC are a twist on the trouble lenders often run into under Respa. Typically, violations occur when lenders pay fees to real estate agents or brokers who provide no service beyond a referral.

Outsourcing arrangements are proliferating in the mortgage industry as lenders seek ways to cut costs.

"You have senior management pushing for fee income, and you have people below them feeling the pressure - people not properly trained on federal regulations," said Robert A. Cook, a partner in the Hudson Cook LLP law firm in Crofton, Md.

Grant E. Mitchell, a former HUD attorney who now practices with Reed Smith Shaw & McClay here, agreed. "Business managers saw a good deal," he said. "Nobody ever thought of it in terms of Respa."

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