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CFPB Aims Sights at Real Estate Offices

February 26, 2014 CFPB, Compliance Matters, Featured Posts, Real Estate News 76 Comments

Well it’s here.  There is a class action lawsuit for $11.2 million against a large real estate company for RESPA violations.

NAR can’t really do anything about this one.  Long & Foster Real Estate is on the short end of the stick with regards to a huge RESPA lawsuit.  They’re allegedly in cahoots with another company sharing settlement fees and they are facing a lawsuit over it all.  A lawsuit to the tune of over $11 million PLUS guys.  I think a lot of us figured the real estate agents out there were pretty well protected by their mega watch dog the National Association or Realtors with respect to this kind of stuff, but it would appear that this isn’t the case.

CFPB lawsuitIf you think about it, NAR really can’t do anything about this and the word on the street is that the CFPB themselves are looking into “several” real estate companies that have these types of relationships.  This should be very very scary to any real estate company out there with this type of agreement with another party.  Why?  Because the CFPB can waltz into virtually any organization and shut them down.  There’s no one to regulate them, or there’s no one for them to answer to.  So if RESPA is in question, it really doesn’t matter who you are, you’re going to have to pay or get shut down.  From what we can see there’s no middle ground with the CFPB.

Of course Long & Foster is going to fight it, but it doesn’t matter, they’ll probably wind up paying something.  We believe we’re right  because it seems like everybody winds up paying something these days.  We’ll let you watch the show for the rest of the details, and we really recommend you do because there are literally thousands of relationships out there that resemble what’s going on with Long & Foster.  If you’ve got one going right now, you should consider dumping it ASAP because the CFPB is on to this and real estate offices are not exempt from their iron fist.

Here’s your association links:  MBA, NAR, NAMB

On a happier note, to get more purchase business you should check out our Listing Booster webinar this Friday.  You can CLICK HERE to register for it.

You all have a wonderful day!

Frank and Brian

  • REORealtor1

    We all certainly know what RESPA is but many companies have been skirting around it for years. I do not like working with companies who’s Realtors are forced to use the ‘designated title company’. The conversation usually goes, ‘I really don’t like them, they don’t do a very good job, but we have to use them’. Then I find the fees and charges are typically higher for my buyer than is customary and the work is often not up to snuff as they know they have a secure situation. If CFPB is going to go after something how about addressing the ‘transaction fee/storage fee’ some RE companies charge? I just love hearing from buyers that they had no clue a company was going to charge this fee until they sat down and wrote the contract. One can charge whatever they want but waiting until it’s time to write the contract after the buyer has worked with an agent for weeks and viewed tons of inventory, finally finding something suitable, and THEN is told they get to pay the selling broker an additional $495 brokerage fee? Really?


      So agree! I have a closing today where all of a sudden there is a “RE Broker Fee” charged to the buyer. If I did this I would be fined upteen thousand dollars and face jail time..WTH???!!! How can they get away with this??!!!

      • REORealtor1

        Raise an issue with the fee. If it’s no where on the contract they can’t just charge it and would this affect your GFE? Wouldn’t that need to be re-disclosed? It may hold up the closing if not! ; )

      • Viva la Revolucion

        Why doesn’t the buyer just say no, and tell the RE Broker to pound sand?

  • Sarcasm Detector

    I agree with REORealtor1. I’m sick and tired of the blatant steering done by the ABAs of real estate companies like Long and Foster, Prudential Home Sale, and Jack Gaughen. As a title professional, I’ve had friends tell me how they were strong-armed by their agents, basically telling them they everything will be a mess if they don’t use their ABAs for title and financing. Time to put an end to ABAs! Let them make their money selling homes PERIOD!

    • REORealtor1

      This may be the only good thing the CFPB ever does!

  • Moreloans4you

    How about the bogus conveyance, oops, I mean commission due at settlement? The buyer and seller are charged at settlement and at places like Keller Williams the agents can set this fee at whatever they want by the company and they get to keep any overage from what the buyer or seller is paying them and put it in their pocket as just additional income earner for no real expense! Just a bogus fee!
    Also, just because I know Keller Williams really well. The agents can buy into the title company and then get profit share checks from the company. Yeah, I
    Know they are a share holder legally and all but talk about a reason to stear you client! And no matter what way you look at it they just construct an entity to try to get around RESPA and they can still get a kickback. If you have a vested interest in a company, would you tell you client to use anyone else? I know agents who get fighting made if the client doesn’t use their title company because they want the kickback!
    I’m sure other companies are guilty of similar things as well so I’m not picking on Keller. I think they are a great company but your right if the CFPB turns their eyes onto some of these companies, it is going to be a real eye opener for both them and their agents.

    • Gayle

      Moreloans4you, I’m sorry but you are wrong about Keller Williams. Our commissions are negotiable, like every other company, due to Fair Trade laws, but are in line with other brokerages and the usual and customary fees everywhere. Commission fees are stated up front in the listing contract as well as clearly stated on the settlement statement and all fees are paid to the broker, not the agent. The agent does not get to “keep any overage” but gets whatever split has been contracted with their broker. And KW profit share is based on growing the company by bringing new agents to KW, not anything to do with title companies. Our broker encourages us to suggest at least 3 lenders. We all have our favorites, of course. As agents we have experience with title companies and lenders, both good and bad. When I know that a certain lenders or title companies are good and will treat my clients in the best way possible, and do a great job, why would I suggest someone else? I have had experience with lenders that messed up a deal by not doing their job right. Most agents want to use a certain title company, not because they get a kickback, but because they are the best. I consider good title reps and good lenders to be an indispensible part of my team, but I certainly don’t get paid for suggesting them. Kickbacks are illegal and we don’t do that. Keller Williams has high standards and that’s one reason why I joined KW.

  • Ksandra

    The attnys need to be next with the padded settlement fees and non disclosures. Title fees have gone from$1500 to $5000 on reos and short sales with everyones hand in the pot. clients are short money to close due to ridiculous fees.

  • Frederick Manning

    geez, guys – looks like this discussion isn’t going your way. Better let Ailes know this is a non-starter

  • Frank Dowd

    It’s about time… These sham marketing agreements and ABA’s have been sticking it to consumers for years. Here’s an idea for the real estate brokers out there trying to increase revenue. Sell more houses.

  • John

    Wait a minute. The facts are all wring here. L&F is being sued by home buyers for $11.2 million, not the CFPB. The CFPB should investigate real estate firms for kickbacks and steering but they aren’t bringing this suit.

  • robaubrey

    What if the lenders, builders, title all joined the NAR? More power

    • Sam450

      Please….Most of them are Associates plus have their own union dues.

  • http://www.homemortgagealliance.com/dharding David Harding

    Can you please source your information. I would like to read it from the source.

  • Jeff Womack

    This is the first thing the CFPB has done that I agree with. There are too many ABA’s that blatantly break RESPA guidelines.

  • Ryan Charles

    It’s about time. Let’s hope it sticks (not holding my breath).
    And I agree — time to look at the builder’s “in house” next…

  • Richard

    Next: new Home Builders often give an “free upgrade allowance” to Buyers if (only if) they use the Builders financing/mortgage company. An ‘illegal” inducement?

  • Negative Nancy

    I don’t see any attraction to being a real estate agent; too few homes to sell, 90% turnover, too many part time agents listing homes for friends and relatives = defusing the opportunities. It’s fine if you are retired and don’t want to work at a golf course and it’s fine if you like sitting open houses on Sundays, but most real estate agents can’t find work in a meaningful occupation which is why I got out of it 30 years ago. Now, the same thing is happening to loan agents….

  • Perfparjer

    Amazing how you guys say we are crazy if we are not members of the National Association of Realtors. I recently quit NAR. Their invitation of the Butcher of Benghazi to speak at the November annual meeting was the last straw. Do you know that 400,000 Realtors are members of TEN companies nationally? Do you think those ten companies have influence at the national level? You bet they do. NAR sold all Realtors out when they sold the MLS data stream to Move.org (Realtor.com et .al.) Thus all MLS members (Realtor owned or not) must pay for internet display of the data. Had NAR marketed listings data from a NAR owned internet platform, NAR member companies and their agents could have shared in the windfall. I agree with other real estate agents and mortgage brokers on this site that are fed up with ABA arrangements. They are anti-competitive and sleazy but those using them will not stop as long as they can hurt their competition while they make a buck. NAR could have prevented this but, you know, those TEN companies have too much stroke.

  • Mark

    Brian–you SHOULD be asking Frank: “Are you STILL a member of the Communist party?” That one is a no win answer for him. Just like the CFPB asking any Mortgage Company or Realtor “Are you still violating RESPA rules?” Ka ching$$ (Funded for their next Dragon slaying event!)

  • Dennis Reese

    Interesting that they are pointing the finger at CFPB when this is a class action lawsuit. there is a previous class action lawsuit, that is still pending, against the same brokerage and Wells Fargo that preceded CFPB by many years. Get off the back of CFPB and follow the law as written. ABA and MSA have been operating in a gray area for decades just waiting for class action attorneys to come looking their way. All ABAs and MSAs should be shaking because of the lawsuits, not CFPB.

  • Tony Perez

    I usually stay clear of my office’s “preferred” service providers. I can find my own. I did as a rookie and made rookie of the year without using preferred anything connected with my office. I can see a Broker/Manager making introductions and helping identify vendors who provide great service but to call them preferred can bring one to an ethical dilemma, especially when asked by a client, “Why are you recommending this provider?” I like my answer which includes what I said before about solid performance and good reviews by previous clients. The “It’s my offices preferred provider” doesn’t usually excite people and I’ve heard clients (with other agents) express their doubts about such a referral and they would prefer to find their own. Once that happens, you start to lose what little control you actually have over the process because you just lost some of your client’s trust. Granted, I did once use a “preferred provider” but that was after a year at that office and she proved herself over time. It’s not always the case. It’s safer for us to refer clients to at least two if not three providers who we already verified are reliable. If you’re new, ask an experienced (and productive) agent who they use. Good luck!

    • http://www.rallypointmortgage.com Vance Walden

      Tony…you are a good man! Wish their were more ethical realtors who actively practiced your principals. I just recently refused an MSA agreement with a Keller Williams branch who was looking for lots of $$ for co marketing. Wouldn’t it be refreshing to just be our own voice and let service and value to our clients speak for themselves…rather than staking to deck to the highest bidder? Let’s hope that the CFPB can finally clean house with this mess that has been going on way too long. Consumers ultimately win!

  • Viva la Revolucion

    Perhaps maybe they will also cap their commissions, and also make them determine on a quarterly basis how much they will earn on any closings with absolutely no deviation, including voluntarily assisting with any fees from said commission. Wonder how much they would like that?

  • disqus_ppczQzKSJt

    If the joint venture is structured correctly then there is no issue. The consumer gets better service and pays the same as anywhere else so whats the problem? The only people complaining are title agents that can’t compete against the in house and the kick backs they used to give are no longer good enough

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