WASHINGTON (10/9/15)--A bulletin issued Thursday by the Consumer Financial Protection Bureau (CFPB) features guidance to the mortgage industry regarding marketing services agreements.
The bulletin consists of an overview of the federal prohibition on mortgage kickbacks and referral fees, and describes examples from the bureau’s enforcement experience as well as the risks faced by lenders entering into these agreements.
The CFPB is responsible for enforcing the Real Estate Settlement Procedures Act (RESPA), a primary purpose of which is to eliminate kickbacks and referral fees. The law covers any service provided in connections with a real estate settlement, including title insurance, appraisals, inspections and loan origination.
Any agreement that entails exchanging something of value for referrals of settlement service business likely violates federal law, regardless of whether a marketing services agreement is part of the transaction, according to the bulletin. This covers the fact that marketing services agreements are usually framed as payments for advertising or promotional services. In some cases the payments are actually disguised compensation for referrals.
The CFPB has investigated cases involving kickbacks and referral fees, including a title insurance company that entered into agreements where the fees paid by the company were based partly on the number of referrals it received, as well as the revenue generated by those referrals.
In another case, a settlement service provider did not disclose its affiliate relationship with an appraisal management company and did not tell consumers that they could opt for shopping for services before it directed them to the affiliate.
According to the bureau, RESPA violations have resulted in more than $75 million in penalties to date.