RESPA Section 8

Posted By: Anonymous

RESPA Section 8 - 12/03/02 09:40 PM

Given the broad definition of a "thing of value", under what circumstances can a bank or mortgage company include a link to a realtor or builder on its website and not be in violation of RESPA's Section 8? Does the use of reciprocal links between a bank and the settlement service provider mitigate or increase risk? For purposes of these questions, assume the links would be to/from individual loan officer or realtor websites.
Posted By: Andy_Z

Re: RESPA Section 8 - 12/03/02 09:51 PM

The answer is, we don't know. The literal answer is, I don't want to be the test case. What risks are you, and your individually listed lenders, willing to take?

There is no official opinion either way, don't get me wrong. At face value it appears minor, but if the results turn out to be major and garner regulatory or competitory attention, watch out.
Posted By: Richard Insley

Re: RESPA Section 8 - 12/04/02 01:21 PM

The $22 Federal Express fee in the "Rodash" case also appeared to be a minor problem--but it almost caused the mortgage industry to collapse!

Section 8 carries a criminal penalty of up to 1 year in prison. Who in your bank wants to take even a tiny risk that you could be the case that becomes HUD's warning shot across the industry's bow?
Posted By: Andy_Z

Re: RESPA Section 8 - 12/04/02 02:28 PM

We often discuss maximum penalties. And while I want neither the maximum nor the minimum imposed upon me or mine, has anyone actually done jail time for RESPA violations? I've often looked up penalties for BSA and flood and used them in training, do we know when RESPA penalties have been imposed?
Posted By: Richard Insley

Re: RESPA Section 8 - 12/05/02 01:24 PM

I've never looked into it because I don't like flirting with disaster. My philosophy is "if you can't do the time, don't do the crime." When the consequences of a particular violation are unacceptable, then your risk tolerance should be zero. No one in my bank ever volunteered to go to jail if we guessed wrong.
Posted By: Howard Lax

Re: RESPA Section 8 - 12/05/02 10:04 PM

Fees for services are OK, and so are advertisements, provided that a kickback cannot be inferred from the advertising fee. You can advertise on a settlement service provider's web site provided that you pay no more than your pro-rata share of the cost of the web site. This is the same issue as a lender publishing an ad in the realtor's newsletter - if you take 10% of the space of the newsletter, you pay 10% of the cost of producing and distributing the newsletter. There are old unpublished letters from HUD warning of the compensation limits related to realtor newsletters.
Posted By: Andy_Z

Re: RESPA Section 8 - 12/05/02 10:41 PM

Howard, that formula seems easier to apply to a 6 page newsletter than a Web site. Have you put thought into how you would do that on the Web, a proportional cost of the site (seems excessive), the section or page with the ad (a possibility but how do you decide on the cost of THAT page), or the more common traffic generated by a link, as monitored by a counter somewhere?
Posted By: Anonymous

Re: RESPA Section 8 - 12/06/02 03:16 PM

Would the cost be considered offsetting if you put a link on each website (i.e., one on the loan officer's going to the realtor and one on the realtor's going to the loan officer site)?
Posted By: Andy_Z

Re: RESPA Section 8 - 12/06/02 03:28 PM

I asked this question before. If a detailed auditor looked at it, they'd have to ask about hit counts. Similar "referral" counts would, in my mind, be required for reciprocal links to cancel out the value of one another. Otherwise there is no effect if I link to you, and you to me. But your referrals to me are 10K hits a month and mine to you are 10 because my site derives to originating traffic, only hits from your link. I'd be the one getting all the value.
Posted By: Richard Insley

Re: RESPA Section 8 - 12/06/02 04:21 PM

I think HUD would laugh at the "offsetting hit count" argument. Section 8 applies to anyone who " or receives a thing of value...", not a "thing of net value." If both are giving or receiving, then both are at risk of sharing a double at Club Fed.
Posted By: Andy_Z

Re: RESPA Section 8 - 12/06/02 05:09 PM

A case may be made that this would fit under a joint advertising exception.
Posted By: Richard Insley

Re: RESPA Section 8 - 12/06/02 06:09 PM

What's the product/service we are jointly advertising?