Marketing Service Agreements and the CFPB

Mortgage and Lending with Amerifirst Financial, Inc Equal Housing Oppurtinity Lender AZ BK0013635 NMLS 145368 LO:1015837

If you've been in the real estate business you know that it is a violation of RESPA for agents to give or receive anything of value in exchange for the referral of business.  The definition of "anything of value" is quite broad according to lenders. Many brokerages do enter into marketing service agreements (MSA) with title agencies, mortgage brokers, or lenders in which they cross promote each other's business.  It is important to note that RESPA allows for joint advertising by settlement service providers only where there is a pro-rata sharing of costs.  The expenses must be equally divided.  Example, if I were to approach an agent about a mail campaign and wanted to co-brand the postcards I could not absorb 100% of the costs of the campaign. For example if I had my information on one side and the agent's on the other we would be required to split the cost 50/50.  If my information was on 80% of the postcard and 20% was promoting the agent then the agent would be responsible for 20% of the costs.  

When I was going through my pre-licensing education we spent a lot of time on this topic. Many companies, specifically lenders will use MSA in order to gain referrals from agents.  You will see many large real estate offices with links to mortgage companies on their websites and "rent" space within their office for loan officers to use.  The broker is not allowed to explicitly tell their agents to refer business to these companies.  The reason that the Consumer Financial Protection Bureau (CFPB) is focusing on these agreements is that they are finding that many are nothing more than a cover allowing payment for the referral of business.  

 I remember one of the first meetings I had with a broker in which I was offered an MSA that was beyond obviously payment for referrals. Needless to say I didn't bother speaking with that particular broker again.  It is important for agents and loan officers to understand the laws surrounding this and to be sure they are compliant at all times.  Most mortgage banks and brokerages have compliance departments that are dedicated to making sure all marketing falls within the guidelines because the last thing they want is knock on door from the CFPB.  

With the CFPB increasing focus on this it is a good time to review any MSA you are currently involved with to ensure compliance.   



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Mike Tizzano

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