FDIC RESPA Section 8 Settlement Acknowledges Legitimacy of Marketing Arrangements

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HomeStreet Bank recently agreed to the issuance of an order to settle an allegation by the FDIC that the bank’s discontinued Home Loan Center-based mortgage business line violated the Real Estate Settlement Procedures Act (RESPA) “by entering into co-marketing agreements using online platforms and desk rental agreements that resulted in the payment of fees to real estate brokers and home builders for their referrals of mortgage loan business.” The order reflects that all of the agreements were terminated. The bank, which does not admit or deny the allegation, agreed to pay a civil money penalty of $1.35 million dollars.

In the press release announcing the settlement, the FDIC states that “[w]hile co-marketing arrangements and desk rental agreements are permissible where the fees paid bear a reasonable relationship to the fair market value of marketing or rental costs, such arrangements and agreements violate RESPA when the amounts paid exceed fair market value and the excess is for referrals of mortgage business.” This is significant, as a federal banking regulator is confirming that both co-marketing and desk rental arrangements are permissible if the fees paid bear a reasonable relationship to the fair market value of marketing or rental costs. In contrast, CFPB Compliance Bulletin 2015-05, which was issued during the tenure of former CFPB Director Cordray, raises doubts as to whether marketing services agreements (MSAs) or similar arrangements are permissible under RESPA. In particular, the CFPB states in the Bulletin that its “experience in this area gives rise to grave concerns about the use of MSAs in ways that evade the requirements of RESPA. In consequence, the Bureau reiterates that a more careful consideration of legal and compliance risk arising from MSAs would be in order for mortgage industry participants generally.” It would be helpful if the CFPB revisited this area and issued guidance more in line with the FDIC guidance.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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