RESPA limits what your real estate agent can earn from a home warranty referral

Every other page in this Library so far covers a law that regulates the warranty provider itself. This one covers something different: a federal law that regulates your own real estate agent's side of the transaction, because a home warranty at closing so often arrives as something your agent personally suggested — not something you went looking for.

Why a mortgage-closing statute reaches a home warranty at all

The Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. §§ 2601–2617, exists to police kickbacks and unearned fees tied to a "federally related mortgage loan" — most ordinary home-purchase financing qualifies. Section 8(a), 12 U.S.C. § 2607(a), makes it unlawful to give or accept "any fee, kickback, or thing of value" for referring settlement-service business. A home warranty purchased or gifted as part of the same closing has repeatedly been treated by the U.S. Department of Housing and Urban Development (HUD) — which wrote RESPA's original rules before that authority moved to the Consumer Financial Protection Bureau (CFPB) in 2011 — as exactly this kind of settlement-service arrangement when a real estate broker or agent is the one steering the business to it.

What's flatly prohibited: getting paid just for the referral

HUD's June 25, 2010 interpretive rule (75 Fed. Reg. 36271) states the core rule directly: a payment from a home warranty company to a real estate broker or agent for marketing or referral activity directed at a particular homebuyer or seller is an illegal kickback under Section 8(a), and the agent may not accept it. A referral, on its own, is never a compensable service under RESPA — Section 8(b) separately bars splitting an unearned fee for one. That holds whether the payment is called a "marketing fee," a "co-op fee," or something else; RESPA looks at what actually happened, not the label on the invoice.

What's allowed: real, itemizable work — not the referral itself

Section 8(c) and HUD's own regulations preserve one narrow lane: bona fide compensation for services actually performed, provided the services are actual, necessary, and distinct from the agent's ordinary brokerage duties, aren't nominal, and aren't a duplicate charge for something already being paid for elsewhere. HUD's own guidance gives concrete examples of what might clear that bar — recording the serial numbers of the home's covered equipment, inspecting that equipment for a pre-existing condition, or photographing it for the warranty company's file. Simply telling a buyer "you should get a home warranty" and passing along a brochure doesn't meet that standard on its own, however routine the practice is in a given market — this is also the specific point a national real estate trade association has publicly disputed since HUD first issued the rule, arguing it draws the line too strictly against a service consumers may genuinely benefit from; the rule itself hasn't been withdrawn or narrowed since.

The narrow exception: a genuine affiliated business

Where a real estate brokerage has its own ownership stake in a home warranty company — an "affiliated business arrangement" — Regulation X's § 1024.15 lets a referral to that affiliate proceed without violating Section 8, but only if specific conditions are all met: a written Affiliated Business Arrangement disclosure, in HUD's prescribed format, naming the ownership relationship and estimated charges, has to be given to the buyer at or before the referral; the buyer can't be required to actually use the affiliate; and the only thing of value the referring agent can receive from the arrangement is a genuine return on its ownership interest — not a payment whose real basis is how many referrals a given agent personally generated. A structure that pays more to whichever agent sends more business isn't a "return on ownership" no matter what it's called internally.

Real penalties sit behind this, and enforcement hasn't gone quiet

A Section 8 violation carries a federal criminal penalty of up to $10,000 and one year of imprisonment, plus civil liability to the overcharged consumer of three times the settlement-service charge involved — with a one-year statute of limitations to bring that private claim. The CFPB, which took over RESPA rulemaking and enforcement from HUD under the Dodd-Frank Act, issued its first public Section 8 enforcement action in several years in August 2023, against a mortgage lender and a real estate brokerage over referral-fee arrangements, and has continued to flag digital lead-referral and marketing-services agreements as an active enforcement priority since. HUD's 2010 home-warranty-specific guidance was never withdrawn in that transition and remains the CFPB's operative position on this exact question.

What this means if a home warranty comes up at your own closing

If your agent or brokerage recommends a specific home warranty company, it's reasonable to ask directly whether the brokerage has any ownership stake in it or receives anything of value tied to your purchase. If the answer is yes, you should be handed a written Affiliated Business Arrangement disclosure — not told about it after the fact. None of this changes whether the warranty itself is a good one; RESPA polices who gets paid for the referral, not the provider's own coverage, exclusions, or claims record, which is what our standard actually grades.

This is general legal-mechanics information, not legal advice for your specific transaction. A RESPA question about your own closing is worth raising with the CFPB or a real estate attorney directly, not resolved from a general explainer.