CFPB Concerns: 2 Major Companies Ending ALL MSAs

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

The Consumer Financial Protection Bureau has never been very receptive to the idea of marketing service agreements, or MSAs.  They view them as a cover for a pay for referral practice which is a RESPA violation.  Unfortunately, in many cases they are correct in believing so and recent action taken by the CFPB has made even those parties in legitimate MSAs rethink their position on these types of agreements. Recently, Wells Fargo and Prospect mortgage announced decisions to discontinue all MSA activity.

These types of agreements have been around for decades and they haven't actually been hidden. RESPA section 8(c)(2) allows for payment of bona fide compensation for goods and services actually provided being exempt from RESPA referral fee prohibitions.  "The CFPB has take 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. HUD for years did RESPA enforcement.  But now that view has changed under the auspices of the bureau via the enforcement action taken against Lighthouse and PHH matter," said Pete Mills, SVP for Residential Policy at the Mortgage Bankers Association.

He's referring to the fact that in June the CFPB fined PHH Corp $109 million for what they say was illegal referrals to a mortgage insurer in exchange for kickbacks.   Earlier in the year Lighthouse Title, a Michigan-based title insurance agency was fined for alleged misuse of marketing service agreements. Many in the industry believe the CFPB was too harsh and that the practices they are citing are not illegal.  "If the bureau is taking a different position on this part of RESPA, let's do this via a rule making process that allows comment and applies prospectively, as opposed to making new rules through enforcement orders," Mills said.

The CFPB has made no secret of their disdain for MSAs.  Like I said, they see them as cover-ups for pay for referral practices.  I've seen enough of them that were pretty obviously so which makes it difficult to argue that position.  However, there needs to be more clearly defined rules as to what is an acceptable MSA and what isn't.  Of course, when you have an agency that is self-funded by fines clarity isn't always in their own best interest.

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Ambassador
2,893,267
Anna Banana Kruchten CRB, GRI, WLS
Phoenix Property Shoppe - Phoenix, AZ
603-380-4886

MIke this is going to be a 'drama' we will all watch unfold as time goes by.  Lots of good will come out of this I'm certain. MSA's are a thing of the past.

PS glad to hear you're all good now!  I meant to ask - what kind of car did you buy? Fun to have a new, reliable car!

Jul 31, 2015 01:20 AM #1
Rainmaker
679,930
Nicole Doty - Gilbert Real Estate Expert
Zion Realty - Gilbert, AZ
Broker/Owner of Zion Realty ZionRealtyAZ.com

Good morning Mike! The few title agencies that I refer to clients have completely backed away from any mutual advertising between them and agents. They are afraid of the grey areas that aren't very well defined that you mentioned. 

Jul 31, 2015 01:29 AM #2
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Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

I think the CFBP is trying its best to insure more transparency for the public in real estate transactions. I don't have to agree with everything they do but considering how poorly the public was served previous to 2008 its hard to argue that the public doesn't need help on the regulation side.

Jul 31, 2015 01:31 AM #3
Rainmaker
1,028,421
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

You cannot blame companies for jumping ship.  Just wish the government would get the heck out of our lives. They are a bunch of bullies. 

Jul 31, 2015 02:20 AM #4
Rainer
126,214
Mike Tizzano
Amerifirst Financial, Inc Equal Housing Oppurtinity Lender AZ BK0013635 NMLS 145368 LO:1015837 - Mesa, AZ
Protect Your Transaction Certified Lender

Anna Banana Kruchten - AZ Top Banana of Real Estate! - Thank you, I bought a 2014 Hyundai Elantra

Nicole Doty - Gilbert Real Estate Expert I know, one of the title companies I host CE courses at wouldn't host them unless I charged 

Joe Pryor Consumer Protection is important but I worry about the lack of structure within the CFPB. They have carte blanche and I'm concerned that the fines they are levying are inconsistent and overblown.  I'll research more into the PHH matter to see how they justified $109 million but the fact that they are self-funded by fines is concerning.  These entities certainly aren't immune to corruption and abuse.

Rob Arnold Unfortunately the actions of a few have led the government to where it is today, albeit I feel it's an overreach.

Jul 31, 2015 02:32 AM #5
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Rainer
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Mike Tizzano

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