RESPA and foreign buyers: referral networks, escrow accounts and who is outside the law

RESPA follows the property’s use, not the borrower’s passport. Owner-occupied and second-home loans are covered; a pure rental is not. The live risk for foreign buyers is paid referral chains that Section 8 prohibits.

Is your loan a “federally related mortgage loan”?

RESPA applies to almost every lender that makes more than $1 million a year in residential loans, including non-bank ITIN lenders and foreign-national specialty shops. What it excludes is business-purpose credit. For this group that means: an ITIN borrower’s primary home, a visa holder’s conventional loan and a non-resident’s vacation home are covered; a non-resident’s loan on a condo that will be rented out is not, and neither is a loan on vacant land or 25 acres or more.

Section 8 and the “facilitator” economy

Foreign purchases run through networks: an agent in the home country, a relocation consultant, an immigration attorney who “knows a lender”, a property manager. Section 8 of RESPA prohibits giving or receiving anything of value for the referral of settlement-service business. A lender paying a foreign agent a “marketing fee” per closed loan, or a broker sharing its fee with the attorney who sent you, violates the rule even if you never see the money — and you often do see it, as inflated origination or processing charges. Ask anyone who refers you to a lender whether they are paid for it. The only lawful arrangement among related companies is an affiliated business arrangement, which must be disclosed in writing at or before referral and may never be a condition of the deal.

Escrow mechanics when you pay from abroad

If the loan carries an escrow account — and as explained on the Reg Z page, higher-priced ITIN loans usually must — RESPA Section 10 caps the cushion at one-sixth of annual disbursements, requires an initial escrow statement at closing or within 45 days, and an annual analysis with any surplus above $50 refunded. Non-residents who fund payments by international wire should confirm how the servicer posts partial or late-arriving amounts: a wire that lands two days late can be treated as a late payment, and the shortage spread into next year’s escrow.

Transfers and the 15-day notice

Portfolio ITIN loans are sometimes sold after seasoning, and foreign-national loans are routinely transferred to specialty servicers. Both the old and the new servicer must notify you at least 15 days before the transfer, and for 60 days afterward a payment sent to the old servicer on time cannot be treated as late. Keep a US mailing address or an email on file that the servicer will actually use; notices mailed to a foreign address arrive slowly and the 60-day window runs regardless.

Section 9 also matters in resort markets: a seller may not require you to buy title insurance from a particular company. Developers selling to foreign buyers sometimes try; you may choose your own title agent.

What to check

• Ask each person in your referral chain whether they receive anything for sending you to a lender; paid referrals violate RESPA Section 8.
• Read the affiliated business disclosure, and remember that using the affiliate is never mandatory.
• Confirm the escrow cushion (maximum one-sixth of annual disbursements) and ask for the initial escrow statement at closing.
• Keep a reliable US address on file so servicing-transfer notices and escrow statements reach you within the statutory windows.
• On a rental purchase, assume RESPA does not apply and negotiate settlement costs as a business buyer would.

Frequently asked questions

My immigration lawyer referred me to a lender and gets a “consulting fee” when I close. Is that allowed?

Under RESPA Section 8, a fee paid for referring you to a settlement-service provider is generally prohibited, whatever it is called, unless it pays for actual services performed at fair value. A disclosed affiliated business arrangement is the narrow exception. You may report suspected kickbacks to the CFPB; in practice the cost of the referral is usually built into your origination charges.

Does RESPA protect a foreign investor buying a condo to rent out?

Generally not. Credit extended primarily for business purposes, including a non-owner-occupied rental, is exempt from RESPA, so the Loan Estimate, escrow rules and servicing-transfer protections do not apply by law. Many lenders still send similar documents voluntarily. If you will live in the unit part of the year, ask the lender how it classified the loan, because that changes the answer.

The rule in full: Real Estate Settlement Procedures Act (RESPA) and Regulation X. The borrower profile: Foreign nationals and ITIN borrowers. Related guides: Conventional loan requirements: credit, down payment, DTI, reserves, property · FHA vs conventional for a first-time buyer: which loan wins, and when · Closing costs explained: what is negotiable, what is not · Earnest money explained: how much, who holds it, and how you lose it.

Other federal rules for foreign nationals and itin borrowers

TILA / Reg Z · TRID disclosures · ECOA · Fair Housing Act · HMDA · SAFE Act / NMLS · ATR / QM · HOEPA · HPA / PMI · Servicing rules · FCRA · Flood insurance · MARS rule · SCRA · LO compensation

RESPA for other borrowers

First-time buyers · Conventional borrowers · Veterans · Self-employed · Investors · Retirees · Bad credit · Physicians · Heroes · Rural buyers · Condo & second home · Refinancing