Mortgage advertising regs

RESPA Section 8: Understanding Marketing and Advertising Regulations

The Real Estate Settlement Procedures Act (RESPA) is one of the most important and most controversial statutes affecting the settlement services industry. The lenders that solicit referral fees are subject to severe penalties.

ATS Secured co-hosted a webinar today called “RESPA Section 8: Understanding Marketing and Advertising Regulations” with ABS Solutions featuring Marx Sterbcow, with Sterbcow Law Group, as the speaker, to highlight this upcoming statute and the repercussions of non-compliance.

RESPA Section 8 Webinar Highlights

Anti-Kickback Statute

One of the main elements of RESPA is the RESPA Anti-Kickback Statute in Section 8. The purpose of this rule is the elimination of abusive practices that drive up consumer costs due to illegal kickbacks.

RESPA Home Warranty Interpretive Rule

Another part of RESPA is the 2010 RESPA Home Warranty Interpretive Rule. In this rule, there are two types of marketing agreements: Flat Fee and Per-Transaction. HUD opposed direct consumer solicitations in this rule.

Regulators have enacted several enforcement actions regarding these service agreements, and the consequences have been significant.

Enforcement Actions

The Lighthouse Title Consent Order Repercussions

  • The CFPB ordered Lighthouse to cease and desist from all MSAs
  • All Lighthouse officers, agents, servants and employees must not violate Section 8(a)
  • All exchanges of things worth more than $5.00 must be documented for a period of 5 years
  • Civil money penalty of $200,000 payable to CFPB

MSA Best Practice following Lighthouse: Advertising Agreements are a high ground

  • Each advertising service must be quantified
  • Pay 3rd party providers everywhere you can
  • No access to sales meetings
  • Do not pay to conduct customer satisfaction surveys
  • Avoid preferential designations
    • Preferred lender
    • Recommended lender
    • Best lender

Lead Generation Agreements

When it comes to Lead Generation Agreements, it is essential to exercise extreme caution. It is expected for the CFPB to enforce this area because it is very difficult to independently value:

  • Pay-Per-Click campaign
  • Customer Management Systems “CMS”
  • Licensing fees
  • Website fees

Avoid any Lead Generation Company where:

  • Company is advertised as “Preferred”, “Recommended”, etc.
  • Virtual tours
  • Facebook/Craigslist/etc. push
  • Lead company solicits, contacts or communicates with consumer
  • Solicits private consumer data
  • Charges per lead or transaction success fee
  • Property website or listing presentations
  • Agent states you have lowest rates or fees

Lead Generation/Lenders should be on alert against:

  • In 43 of the 50 states the payment of money to solicit mortgage products violates state Safe Act
  • In 8 of the 50 states even if money is not paid it is still illegal
  • UDAAP
  • Fair Lending
  • Telemarketing Sales Rule

All in all, RESPA Section 8 is a rule that everyone in the financial industry needs to take notice of. If your company wants to keep reputational security and can’t afford heavy fines, compliance with this rule is not an option. It is a necessity.

Want to make your mortgage process easier and more accurate? Contact ATS Secured today.

Interested in learning more from this webinar? Download the full webinar, complete with Q&As, today!

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply