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