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#2275824 - 09/21/22 08:25 AM RESPA Section 8
terpsfan Online
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If a realtor puts us on a flyer which is a thing of value is there any respa issue when we don’t refer people to realtors? If the thing of value is not for referrals is there any issues?

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RESPA
#2275830 - 09/21/22 12:58 PM Re: RESPA Section 8 terpsfan
Dan Persfull Offline
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The below link has discussion concerning the bank's name being advertised on a developer's web page. It would be similar to the bank's name being advertised in a flyer.

https://www.bankersonline.com/forum/ubbthreads.php/topics/2275480/1
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#2275856 - 09/21/22 03:33 PM Re: RESPA Section 8 terpsfan
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But if we are getting the referral and the thing of value how would this fall under RESPA Section 8?

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#2275889 - 09/21/22 07:02 PM Re: RESPA Section 8 terpsfan
Dan Persfull Offline
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(b) No referral fees. No person shall give and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person. Any referral of a settlement service is not a compensable service, except as set forth in §1024.14(g)(1). A company may not pay any other company or the employees of any other company for the referral of settlement service business.
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#2275901 - 09/21/22 09:48 PM Re: RESPA Section 8 terpsfan
terpsfan Online
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So we cannot accept anything of value even if it has nothing to do with referrals?

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#2275905 - 09/22/22 05:57 AM Re: RESPA Section 8 terpsfan
rlcarey Offline
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Why would someone provide you free advertisements and why would the bank agree to that? No one does anything without a purpose. Who does this realtor know in the bank? Who are they doing a favor for? Who are they going to actually refer their clients too? Do you think that person is not going to refer business their way also?
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#2275906 - 09/22/22 07:55 AM Re: RESPA Section 8 terpsfan
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That is true but what if there truly was no value going back to the realtor only that their customer was getting a quality loan. I don’t disagree that there seems like there must be something in it for them but what if there is not?

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#2275927 - 09/22/22 02:52 PM Re: RESPA Section 8 terpsfan
Dan Persfull Offline
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IMHO it doesn't matter if there is nothing in it for the Realtor. The fact is the bank is accepting free advertising in anticipation of receiving referrals from the Realtor. And there is something in it for the Realtor. It gives them another source of financing to refer their clients to in their marketing materials.
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#2275929 - 09/22/22 03:22 PM Re: RESPA Section 8 terpsfan
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I know Dan and I have gone back and forth on this previously and I respect Dan's conservative approach to this issue. Randy also again raises the point that this activity raises questions. As such, I don't want to speak to whether allowing realtors to do misc advertising on your behalf is a good idea or not.

That said, RESPA speaks to an exchange where a thing of value goes one direction and the referrals come back. If there are truly no referrals whatsoever then you can't have a violation of RESPA.
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#2275931 - 09/22/22 03:37 PM Re: RESPA Section 8 terpsfan
rlcarey Offline
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While I do not disagree, are you going to let just anyone stick the bank name in their advertising. Does marketing get final say on the advertising for branding purposes? Is it reviewed by Compliance to make sure all compliance issues are addressed? And what if this realtor is a racist and only caters to white clients or slow play minorities? How does that skew your mortgage lending outreach. When a potential realtor client complains to your regulator, since joint advertising is a form of endorsement, what are you going to say to them?

Be very careful of your bedfellows is all I can say.
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#2275932 - 09/22/22 03:55 PM Re: RESPA Section 8 terpsfan
Dan Persfull Offline
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The bank is allowing the Realtor to use their name as another financing source to refer their clients to in their marketing material. That in itself could be construed as a referral by the Realtor and it could be construed the bank is "endorsing" the Realtor in exchange for the free advertising..

The Realtor's thing of value is an additional financing source to advertise in their marketing material, the bank's thing of value is free advertising. Under Sec. 8 the thing of value only has to be perceived.

If you want to play loose with section 8 then senior management needs to be aware when they are making their risk decision they may need to be fitted for an orange suit.

Penalties for violation of Section 8 of RESPA are rather stiff. Violations are punishable by a fine of not more than $10,000 or a prison term of up to one year, or both. In addition, violators are liable for damages in a civil suit up to three times the amount of any charge paid for the settlement service. 12 USC 2607(d)(1) and (2).
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#2276771 - 10/18/22 09:36 PM Re: RESPA Section 8 terpsfan
Eric The Underwriter Offline
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Received from a Realtor...

"We have had such a successful partnership and look forward to an even better 2023. I wanted to see if you would be interested in sponsoring an item(s) for our Fall Client appreciation event this weekend. Of course we would provide advertising stating "sponsored by '' and if you have any "goodies" we would pass those out for you. Attached is a flyer with the options. We have over 100+ registrations (not including their family members) so it's going to be a great opportunity for both of us!"

The attached flyer offered the ability to "sponsor" items like Food ($500), Venue ($350) and Inflatable Slide ($675) among others.

Am I correct in that pretty much everyone would agree that this would be a clear violation? Or are there any differing opinions on something like this. The Compliance side of me says to stay as far away as possible. The Business side of me knows that some other lender either will not recognize the violation or will not care and they will get the exposure instead.

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#2276822 - 10/19/22 08:10 PM Re: RESPA Section 8 terpsfan
rlcarey Offline
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You just have to determine whether it falls into this category.

(g) Fees, salaries, compensation, or other payments. (1) Section 8 of RESPA permits:

(vi) Normal promotional and educational activities that are not conditioned on the referral of business and that do not involve the defraying of expenses that otherwise would be incurred by persons in a position to refer settlement services or business incident thereto; or
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#2277330 - 10/28/22 08:06 PM Re: RESPA Section 8 terpsfan
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What about a different scenario: Mortgage lender wants to refer borrowers who want to get pre-qualified and are not currently in contract with a real estate agent to a real estate broker company so they can be connected with a real estate agent. No fees are paid. Just a referral of a consumer from one SSP to another SSP. Their is a contract. But their is no payment of fees.

I think the referral itself is a lead and constitutes a thing of value even if no payment is exchanged. And would be a violation of Respa.

However, the argument is that there is no thing of value or money being paid so their is no RESPA violation.

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#2277336 - 10/28/22 08:43 PM Re: RESPA Section 8 terpsfan
rlcarey Offline
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What do you mean by "Their is a contract."?
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#2277345 - 10/29/22 04:36 PM Re: RESPA Section 8 terpsfan
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a written agreement

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#2277346 - 10/31/22 11:24 AM Re: RESPA Section 8 terpsfan
rlcarey Offline
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Well, a contract is usually a written agreement, so that is not what I was actually asking.

I am talking about what in the world is in this written agreement. Who wrote this written agreement and prior to signing this written agreement, what did your legal counsel have to say about it? Is this supposed to be a marketing service agreement? Since there are no fees involved, why is there a need for a contract. There has to be some sort of mutual benefit for it to be a binding contract.
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#2277352 - 10/31/22 02:32 PM Re: RESPA Section 8 terpsfan
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What is in the contract may be related to this but I would be concerned about a quid quo pro. If you are referring customers to the realtor in exchange for them referring customers back to you then, yes, you have a RESPA problem.
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