Marketing Services Agreements: ‘Listen to Your Regulator’

SAN DIEGO–Recent Consumer Financial Protection Bureau guidance on Marketing Services Agreements–arrangements between settlement service providers allowing one party to market another’s services–appears to discourage MSAs, analysts say.  

“[The Real Estate Settlement Procedures Act] is a 40-year-old statute and it has baffled regulators and others during that entire time,” said Mitch Kider, chairman and managing partner with Weiner Brodsky Kider PC, Washington, D.C., here at the Mortgage Bankers Association’s 102nd Annual Convention and Expo. He noted that RESPA prohibits giving or accepting any fee, kickback or thing of value pursuant to any agreement that business incident to a real estate settlement service involving a federally related mortgage loan shall be referred to any person.

Kider said RESPA’s Section 8 dictates what you can and cannot do with your relationships. “Section 8 of RESPA can be a little ambiguous, but it is in fact a dangerous statute for everyone in this room,” he said. “Section 8 violators are not only liable for civil penalties but there is criminal liability as well.”

RESPA has a very broad definition of what a referral is, Kider said. He noted that the statute considers any oral or written action that has the effect of influencing the selection of a settlement service provider a referral. “Isn’t that a little like marketing?” he asked. “It sounds like what you want to have done when you market yourselves.”

The CFPB took over RESPA enforcement from HUD and its actions and its October 10 Compliance Bulletin indicates that it may not apply the same criteria that HUD did–and that it may not regard MSAs as permissible at all.In an analysis of CFPB’s Compliance Bulletin, MBA urged lenders to immediately re-evaluate their MSA programs if they wish to avoid supervisory or enforcement scrutiny that considers many of these arrangements to be violations. 

“While some market participants may argue there is ‘nothing new’ in the [CFPB’s] Bulletin, MBA views it as a strong warning to the industry to reconsider existing MSAs or any plans to establish new ones,” said MBA Senior Vice President of Residential Policy and Member Engagement Pete Mills. 

Kider said the CFPB has made itself clear. “This industry has a regulator in charge of enforcing RESPA and this regulator is telling our industry they don’t like MSAs and don’t think you should be doing them,” he said. “The issue we all face together is, ‘what do we do now?’ Well, we know we have a regulator that says ‘I don’t want you doing those things.’ I think you’re crazy at this stage not to listen to your regulator.”