Monthly Archives: August 2015

Is It the End for Marketing Services Agreements?

businessman-562572_640If you are uncertain about the CFPB’s position regarding marketing services agreements in the residential real estate industry, you are not alone. It has definitely been a “hot button” of late, with opinions (and CFPB rulings) running the gamut. But it seems we have reached a point where conclusions can be drawn and wise choices can be made.

As we all know, prior to “Dodd-Frank,” marketing services agreements were commonplace. Pete Mills, Senior Vice President for Residential Policy at the Mortgage Bankers Association, broke it down simply, “[T]his has not been hidden in the dark. There’s a section of RESPA that talks about payment of bona fide compensation for goods and services actually provided being exempt from RESPA referral fee prohibitions, and a whole body of industry practice backed up by regulatory counsel opinion on MSAs.”

But Mills notes that changes began when CFPB took the regulatory reigns from HUD. “The [CFPB] has taken a very different view from HUD of the permissibility of these arrangements. This is not a case of something that’s been unenforced for decades. Everyone knows about these.” Indeed, since taking over enforcement of these agreements from HUD in 2011, the CFPB has steadily taken a more aggressive stance against them. And recently, it has taken aim at ridding the industry of them altogether.

Clearly, all agree that MSAs that involve kickbacks are illegal. Slowly but surely, however, the CFPB has been taking the position that all marketing services agreements have at least an element of a “kickback” notion to them. When Wells Fargo recently announced it was doing away with all marketing services agreements, Samuel Gifford, CFPB spokesman, noted, “Wells Fargo’s decision to exit all marketing services agreements is an important step for the mortgage industry towards ensuring compliance with the RESPA statute and freeing up more choices for consumers.”

While the new CFPB position may be aggressive, it has its supporters. Gary Acosta, co-founder and CEO of the National Association of Hispanic Real Estate Professionals and a member of the CFPB advisory board, puts it plain and simple, “These arrangements [MSAs] have been common between lenders and referral sources . . . for years. . . . There has always been a fine line between legal MSA arrangements and the payment of referral fees or ‘kickbacks.’ . . . . Where that line actually resides is a matter of interpretation of RESPA’s guidelines, but common sense makes it clear that compensation paid directly to a referral source is a form of kickback no matter how we dress it up with more flattering terms.”

So there we have it. Acosta states unequivocally CFPB’s current position with respect to MSAs. All lenders should take note of this. And any lender that continues the practice of using marketing services agreements does so at the risk of having the CFPB knocking at its door.

Sources: 1) Garrison, Trey. “CFPB to mortgage industry: Get out of MSAs” – July 30, 2015 – HousingWire (

               2) Acosta, Gary. “No Doubt About It, MSAs Must Go” – August 12, 2015 – National Mortgage News (


CFPB: Protector or Predator?

800px-Red-tailed_Hawk_(Audubon)“The hawk with talent hides its talons.” – Author Unknown

*  *  *  *  *  *

We have just passed the fifth anniversary of the creation of the federal Consumer Financial Protection Bureau. Passed as part of the Dodd-Frank bill in July 2010, the Bureau was set in motion to protect consumers from unscrupulous and predatory lending practices. At the time, it sounded fair enough. Who wouldn’t want to be protected from such conduct?

But since its creation, many argue that it is the Bureau that has become the predator. Indeed, some would liken it to the ubiquitous red-tailed hawk – its presence can be seen and felt virtually everywhere in the United States, it sets its sights near and far, and has the ability to strike at any time. And most troublesome to some is its sheer speed and power. With the development of its consumer-complaint service, the CFPB has developed powers no one could foresee.

Many argue that it is the CFPB’s power that is out of control. Notes Richard Hunt of the Consumer Bankers Association, “CFPB is the most powerful agency we have seen in Washington since J. Edgar Hoover ran the FBI.” Adds Sheila Bair, former chair of the FDIC, “The financial institutions understand there’s somebody looking over their shoulder now. There’s a cop on the beat.”

A cop is on the beat indeed. Since the creation of the consumer-complaint division, the CFPB has received approximately 650,000 complaints against lenders. To date, it has issued hundreds of millions of dollars in penalties and generated more than $11 billion in relief for roughly 25 million consumers. And it appears it has no intention of letting up. Richard Cordray, CFPB Director, makes no apologies, stating that its broad power, “gives us the ability to shape an industry toward being consumer-friendly. If that sounds like that’s a major change in the markets, so be it.”

So what does all this mean for real estate lenders? Honestly, it depends upon one’s perspective. It certainly will keep everyone on his or her toes, and this is not necessarily a bad thing. On the other hand, as history has taught time and again, too much unchecked power can wreak havoc even for individuals and institutions with the best intentions.

For now, lenders and those who work for them should definitely stay ahead of the curve. This perhaps can be best accomplished by striving to mirror the goals of CFPB, as well as keeping abreast of all CFPB rules and regulations. In accomplishing this, you will know you are at least doing your best to comply with the spirit of the CFPB. And, in the end, this surely can’t help but work to your advantage.

Source: TIME – Calabresi, Massimo – August 13, 2015 – ( – Appearing in August 24, 2015 Print Edition


Dialogue Key to Learning TRID

meeting-106591_640In a recent article, National Mortgage News reported that many real estate agents and homebuilders remain in the dark about TRID. On the one hand, this is quite incredible. (This blog alone has devoted most of the summer’s posts to the topic.) On the other hand, when you stop to consider why this may be, it perhaps is not so surprising after all.

In the August 3 article, “Realty Agents, Builders Still Clueless About TRID,” Brad Finkelstein notes that the main reason is straightforward. Stated Finkelstein, “Some of the lenders they [realtors and builders] rely on to advise them are poorly informed, too, and prone to spread bad information about the TILA-Respa Integrated Disclosures that take effect in two months.” Again, given the significance of the changes TRID will bring about, the fact that lenders do not understand TRID is perhaps mind-boggling. But if this is true with respect to a significant percentage of lenders, it is no wonder that little information has trickled down to realtors and builders.

Despite what some may believe, TRID will impact everyone in the residential real estate industry, not just those involved in the loan process. For example, given the new (and more stringent) timing issues surrounding required disclosures – and ultimately getting to closing – agents and builders can provide valuable assistance to their clients by simply informing them of the importance of preparing early for the loan application process. Obviously, a key component to smooth sailing in the “post-TRID world” will be that all in the industry understand its requirements.

It is therefore incumbent upon all who are “in the know” to start a dialogue with those who are not. Noted Drayton Saunders, president of Michael Saunders and Co. in Sarasota, Florida, “You can never be too prepared, and it is very hard to prepare somebody until they know it is really going to affect their business.” Again, if agents and builders knew of the impact they could have, they would be more likely to educate themselves.

And the fact is, while TRID will bring broad changes, they really are changes for the better, and not very difficult to understand. Perhaps Ron Turner, president of TRI Pointe Connect of Scottsdale, Arizona sums it up best, stating “[TRID] is no different than any other change that the industry will go through. So, it’s my belief that those that embrace it sooner will manage through it without having any negative impact on their business.” Adding to Turner’s thoughts is Michael Deery, president of Citiwide Financial, a San Diego, California mortgage lender, ”We are in an ever-changing mortgage world, and extra compliance is just part of the landscape these days. Those who adapt quickly will prosper, those who don’t will be left behind.”

Indeed, as a loan originator, you simply cannot afford for anyone in your network to be uninformed about TRID. There is still time – but it is now of the essence. Make it a point to start a TRID dialogue with everyone you can.

Source: Finklestein, Brad. “Realty Agents, Builders Still Clueless About TRID” – August 3, 2015 – National Mortgage News (


House Bills Address TRID Enforcement and Revised QM

us-capitol-building-826993_640Last week, the House Financial Services Committee took two major steps relating to residential realty. One, a call for a delay in TRID enforcement, likely will be cheered unanimously as it seeks to provide the industry with a bit of breathing room. As for the other, reviews are likely to be a mixed bag.

As noted in previous posts, the new TRID requirements are broad in scope. Implementation of the new documentation into the closing process will likely take more time than originally anticipated. Taking note of this reality, the House committee, while sticking to a start date of October 3, voted to delay enforcement of its provisions until February 1, 2016 as long as lenders make a “good faith effort” to comply. Rep. Brad Sherman of California noted that, “This bill does not delay for one minute the new form. It simply says that, for a period of a few months [120 days], if you do everything possible to implement the new policy, and you screw up this way or that way, you are not going to be faced with the lawsuits or the enforcement actions.”

The committee also passed a measure to relax the Consumer Financial Protection Bureau (“CFPB”) rules regarding a qualified mortgage (“QM”). The bill would create a “safe harbor” that would exempt a bank from QM requirements as long as that same bank holds the loan in its portfolio, thereby assuming 100% of the risk of loan default. The bill’s author, Rep. Andy Barr of Kentucky, noted that the proposal would expand the availability of mortgage lending, while at the same time ensuring a bank would take every step possible to make certain that a borrower would repay the loan.

The “safe harbor” bill is not without its opponents, however. No one has forgotten the real estate mortgage disasters brought to a head in 2008 due to benign enforcement of regulations. At this point, it seems the bill will become law only through more engaged negotiation and perhaps “guardrails” being put in place, such as the types of mortgages allowed and sizes of banks to which the proposed safe harbors would apply. Stay tuned on this one!

Source: Helman, John, “House Committee Passes Bills to Delay TRID Enforcement, Revise QM” – July 29, 2015 – National Mortgage News