Real Estate Settlement Procedures Act ("RESPA")

STATEMENT OF POLICY

This Statement of Policy sets forth First American CREDCO’s position regarding the applicability of the Real Estate Settlement Procedures Act ("RESPA") to the giving and/or providing of free credit reports in order to obtain and/or secure future business from particular mortgage brokers/lenders.

Section 8 of RESPA generally prohibits the giving (or acceptance) of any "thing of value" in connection with an understanding for, or to induce, the referral of real estate settlement service business involving a "federally related mortgage loan."

The definition of "federally related mortgage loan" is sufficiently broad so that virtually any transaction involving a purchase or sale of one to four family properties in which a portion of the purchase price is financed will be covered under RESPA, as well as any re-financing of any such property.

A "settlement service," for purposes of RESPA, broadly includes just about any conceivable service provided in connection with a prospective or actual settlement. Examples of included services include mortgage loan and mortgage brokerage services, real estate brokerage services, title policies and services, attorneys’ services, notarization, preparation, delivery and recordation of documents, credit reports, appraisals, escrow, private mortgage insurance, casualty, flood, and homeowners’ warranty insurance.

A "referral" consists of any oral or written action directed to a person which has the effect of affirmatively influencing the selection of a provider of a settlement service or business incident thereto, when the person will pay a charge attributable in whole or in part to such settlement service or business.

A "thing of value" includes any payment, advance, fund, loan service or other consideration which is provided either directly or indirectly to a person referring settlement business. A "thing of value" can take many forms -- money, discounts, services of all types at special or free rates, trips and payment of another person’s expenses.

Violation of RESPA Section 8 results in potential treble damage civil liability, and may result as well in criminal prosecution. In addition to the Department of Housing and Urban Development, any state Attorney General or Insurance Commissioner can bring an enforcement action under Section 8 of RESPA. A record number of treble damage suits are presently pending, and yes, real people have gone to jail for violating the law. Criminal penalties can range from up to a $10,000 fine, or imprisonment for up to one year, or both. Both the person paying and the person receiving a prohibited payment are subject to the civil and criminal penalty provisions of RESPA.

First American CREDCO takes the position that anyone within its organization that is providing free credit reports to particular mortgage brokers/lenders in an effort to obtain or secure present or future business may be in violation of RESPA Section 8 and is therefore, required to cease and desist from engaging in such activity. If you know, or have reason to believe that any of your clients and/or potential clients or anyone within the First American CREDCO organization may be violating RESPA, please contact First American CREDCO’s Compliance Officer immediately.

November 4, 1999

Ref //RESPA//11.4.1999//J.Wydra, Compliance Officer, FAC//