Back in 2014, the CFPB said that improper Marketing Service Agreements (MSAs) between real estate agents and mortgage lenders undermined consumer protections from kickbacks because they both increase costs to consumers. The CFPB has gone as far as stating that a MSA itself is a thing of value that can be evidence of a violation of Section 8 of the Real Estate Settlement Procedures Act (RESPA). The CFPB has regularly enforced the penalties allowed under Section 8 of RESPA against mortgage lenders and title companies.

However, the CFPB’s recent consent order against two real estate brokerages should be a wake-up call for real estate agents that currently use MSAs as a guise to pay for referrals.

Specifically, the CFPB took action against two real estate brokers and a mortgage servicer that took illegal kickbacks from Prospect Mortgage. Prospect Mortgage will pay a $3.5 million civil penalty for its illegal conduct, and the real estate brokers and mortgage servicer will pay a combined $495,000 in consumer relief, repayment of ill-gotten gains, and penalties.

“Today’s action sends a clear message that it is illegal to make or accept payments for mortgage referrals,” said CFPB Director Richard Cordray. “We will hold both sides of these improper arrangements accountable for breaking the law, which skews the real estate market to the disadvantage of consumers and honest businesses.”

The real estate brokerages are RGC Services, Inc., (doing business as ReMax Gold Coast), based in Ventura, Calif., and Willamette Legacy, LLC, (doing business as Keller Williams Mid-Willamette), based in Corvallis, Ore., are two of more than 100 real estate brokers with which Prospect had improper arrangements. Planet Home Lending, LLC, is a mortgage servicer headquartered in Meriden, Conn., that referred consumers to Prospect Mortgage and accepted fees in return.
The CFPB’s investigation found that ReMax Gold Coast and Keller Williams Mid-Willamette accepted illegal payment for referrals. Both companies were among more than 100 brokers who had marketing services agreements, lead agreements, and desk-license agreements with Prospect, which were, in whole or in part, vehicles to obtain illegal payments for referrals.

Under the consent orders, both companies are prohibited from violating the Real Estate Settlement Procedures Act, will not pay or accept payment for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services. ReMax Gold Coast will pay $50,000 in civil money penalties, and Keller Williams Mid-Willamette will pay $145,000 in disgorgement and $35,000 in penalties.

If you have questions or concerns about MSAs or other agreements between real estate brokerages, lenders, or servicers, contact Elley Law PLC at (480) 788-4529.