One of our mortgage originators has an opportunity to market themselves as a preferred lender for a local builder. While I understand if we mention the builder then the cost of the flyer must be pro rated between the builder and my employer. I do, however, have two other questions.

1. Our previous Compliance Officer stated we could never use the term 'preferred lender' in an advertisement. I'm unfamiliar with why, and don't think that is a factual statement.

2. If this is done in a flyer form would anyone have any suggestions on where the flyer is distributed? I do know that we could state these were to be placed in specific model homes.

Thanks!

Skittles, I can't answer your questions, but a comment that the mortgage originator could not be a preferred lender unless (s)he is lending their own money. The bank is the lender.

Skittles, the "preferred lender" term makes some people nervous because it sounds like an endorsement (or, dependent upon who you ask, is an endorsement). This can create problems if you have a more in depth marketing relationship, for example if you are paying for the opportunity to be "preferred lender" or if "preferred lender" comes with perks like being included in sales contracts.

This is all in the context of RESPA Section 8. I suspect some lenders believe that using the "preferred lender" term invites additional scrutiny and they may be correct. I don't know the depth of what this relationship might look like but look into Marketing Service Agreements and the CFPB's "guidance" on these types of agreements so you can see the red flags.

Placing flyers in model homes is pretty common as there tends to be foot traffic.

Preferred lender has been specifically noted by the CFPB as indicative of a referral, so if you are paying for being a "preferred lender," then this becomes a RESPA Section 8 issue.

While we are on the topic. In terms of regulatory reform, RESPA Section 8 is one of the most ambiguous and unenforced regulations out there. Everyone here knows of a competing bank or mortgage company that is blatantly breaking the rules and the lack of enforcement creates a terribly unbalanced playing field. This is one that needs to be reformed or removed. IMO.

Agree, Norman, though I would say Independent Mortgage Banks are the ones generally at the forefront of rule breaking, as they have no effective oversight body for such things.