We all have heard the old saying, “If it looks like a duck, walks like a duck and quacks like a duck; it must be a duck”.
Well, this also holds true for mortgage marketing service agreements (MSA). CFPB is taking a long hard look at entities with such agreements and a tough stand on enforcement for what they determine to be violations under Section 8 of RESPA. This should be of interest to all lenders, as well as to those entities that enter into such agreements with a lender (Illegal Referrals).
It has become somewhat commonplace for a lender to enter into an agreement with a Realtor or Builder to share some expenses, rent space or advertise in publications or on websites, with the expectation that one party will refer business to the other.
The CFPB says this may not be allowable under RESPA. Any payment by a lender or acceptance of anything of value by a source, where the referral of business is involved, constitutes a violation. CFPB hasn’t come out and said that all MSA’s are illegal, but their recent enforcement actions and their consent order, states that a mere marketing agreement, in and of itself, may be considered a “thing of value”. That means, just by entering into such an agreement, you may be violating Section 8 of RESPA.
Remember, there’s a new Sheriff in town and things are being interpreted a little differently now. In this case, the Sheriff interpreting the rules will also be the one doing the investigation, analyzing the facts, making the final ruling and determining the punishment.
Since we already have a glimpse into the thought process, it would be prudent to take a long hard look at any existing MSA’s and do some careful analysis before entering any new ones. Getting a legal opinion wouldn’t be a bad idea. Better to be safe than sorry.
If the agreement looks like a referral, sounds like a referral or even resembles a referral, with anything of value transferring between parties, CFPB may see it as being illegal. Be careful, be very careful.
Do you have any MSAs? Do they mention, or refer in any way, to an expectation of a referral of business? Were they reviewed and approved by Counsel?
Make sure you have your safety on; you’re not operating in a blind and are in a position to duck any CFPB actions.
Maybe these MSAs aren’t all they’re quacked up to be…