Enforceability Status
South Carolina permits builders to offer incentives conditioned on using a preferred lender, subject to federal RESPA affiliated business arrangement disclosure requirements. South Carolina's mortgage lending statutes do not impose additional restrictions on preferred lender arrangements in new construction contracts.
Legal Analysis
Federal RESPA requirements under 12 U.S.C. Section 2607 govern preferred lender arrangements in South Carolina. RESPA permits affiliated business arrangements provided the builder discloses the affiliation, the buyer is not required to use the affiliated lender, and no impermissible referral fees are exchanged.
South Carolina regulates mortgage lending through the South Carolina Mortgage Lending Act (S.C. Code Ann. Section 37-22-100 et seq.), administered by the South Carolina Department of Consumer Affairs. The Act establishes licensing and conduct requirements for mortgage loan originators and lenders but does not specifically address or restrict builder preferred lender incentive programs.
The South Carolina Unfair Trade Practices Act (S.C. Code Ann. Section 39-5-10 et seq.) prohibits unfair or deceptive acts in trade or commerce. This statute could potentially be applied to a preferred lender arrangement that involved material misrepresentations about financing costs, though no published South Carolina cases have addressed this issue in the new construction context.
South Carolina's growing new construction markets, particularly in the Charleston, Greenville, and Myrtle Beach areas, commonly feature preferred lender incentive programs. Buyers should compare loan terms from multiple lenders to assess whether the builder's incentive delivers genuine savings over the life of the loan.
Relevant South Carolina Law
Prohibits kickbacks and unearned fees in real estate settlements but permits affiliated business arrangements with proper disclosure.
Regulates mortgage lending in South Carolina, including licensing requirements for mortgage loan originators and lenders.
Prohibits unfair or deceptive acts or practices in trade or commerce, providing treble damages for willful violations.
Builders in South Carolina Using This Clause
What South Carolina Buyers Should Know
- Compare total loan costs independently Obtain a Loan Estimate from the builder's preferred lender and at least one independent lender. Compare interest rates, origination fees, and total closing costs to determine whether the builder's incentive offsets any cost differences.
- Request the affiliated business arrangement disclosure If the builder's preferred lender is affiliated with the builder, federal law requires a written disclosure. Ask for this document and review the financial relationship.
- Negotiate incentives with your own lender Some builders will extend partial incentives even if you use an outside lender. Ask whether any closing cost contributions or upgrades can be retained if you choose a different financing source.
- Review lock-in deadlines carefully Preferred lender clauses often include rate lock deadlines and application timelines. Understand these dates to avoid forfeiting incentives or delaying your closing.