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The CFPB is looking at MSA’s.  If there is any money exchanged or a reduction in costs for referrals you’re on thin ice.



additional comments on
"Make Sure Your MSA is in Order"

  1. Frank Dowd says:

    I think that Wells Fargo provided the industry with all of the guidance that it needed regarding MSAs. They terminated all of their MSAs after determining that there was no way to structure them and remain 100% RESPA compliant at the same time. Even though in PA the attorney for the state Association of Realtors has been warning members about the enforcement of MSAs and ABAs, their members for the most part have been ignoring the warnings. Between this and the release of the NAR "Danger Report" the industry is clearly in denial. If they don't start providing their customers with more options, better value and transparency, someone else will.

  2. Bob Hagan says:

    Wow, Novel Idea. How about the mortgage broker gets paid for doing the loan. The realtor gets paid for selling the house. The title company gets paid for the title work. The builder gets paid for building and selling the house . Oh, and everyone keeps their hands out of each others pockets. Ya know, that just might work.

    1. Frank Garay says:

      Haha! That would be the ticket Bob! Agreed!

  3. John Dunn says:

    CFPB should look into the large production builders…KB, DR Horton, etc. They offer incentives on their homes IF the buyer goes with their in-house lender. There is no way for an outside lender to compete when they will take away $5-6K in incentive to the buyer/borrower if they go with an outside lender along with not paying the entire title policy. How is this not a violation? I interviewed with KB Mortgage a few years ago just to gain some information and I was told they expect their LO's to have an 80%-90% capture rate on all home sales. Seems pretty easy to do if your giving the client thousands of dollars and a somewhat competitive rate. The CFPB should go after these builders!!! As for MSA, I've heard many are switching to a desk rental to avoid the CFPB crack down. As long as rent is the going rate for the area, I don't see where the CFPB could step in on this situation.

  4. I know we all want to make money, but from a realtor's point of view. Don't focus on getting into a relationship for referrals or a kickback. Try this…start working harder and sell more houses! I have companies that I refer my clients to, but I always disclose that I receive no money and that I use them because they give me the results I want and help me to maintain my reputation. I also tell them up front that if they don't give my clients the best experience possible that I will not use them anymore. Simple as that. I sell houses because I love real estate and I truly love to help my clients and ultimately to take care of my family. I do not do this to create warm fuzzy relationships with lender, title companies, etc.

  5. Dora Griffin says:

    LOL, give them time to figure out whose palms to grease before they get out of msa's. My preference would be for cfpb to focus on getting rid of AMC's but at least msa's need to go. The problem with them is people do not shop when they are being pushed to use providers with no research. Not so much they get kickbacks, except in the case of a builder owned bank.

  6. The big issues that I see are with Builders who offer huge incentives for buyers to use their in-house lender and/or huge disincentives it they go outside for financing or title, while giving the salesperson big spiffs for getting the buyers to stay in house. Similarly, fraught with conflict is the big real estate brokerages that offer their Realtors big spiffs to get the buyers to use their title company, preferred lender, inspection company, and any number of vendors from ADT Security to movers and the local pest control company, all of which give kick-backs to the brokerage and the Realtor.

  7. Scott Lawson says:

    Why don’t you guys do a piece about Quicken and how they are soliciting realtors with their purchase leads in exchange for a 40% cut of the realtor commission if the deal closes with them–payable to their shell real estate brokerage In House Realty: https://www.inhouserealty.com/

    Money in moving so fast from the realtor to the lender in exchange for buyer leads it will make your head spin….Who’s talking about that???

  8. Scott Lawson says:

    I’ll add this from their website to save you the research:

    Family of Companies — In-House Realty is part of the Quicken Loans Family of Companies, which allows us to share the same perks and incentives, yet retain our small office community. Quicken Loans has appeared on FORTUNE Magazine’s ‘Best Companies to Work For’ in America for 12 straight years!

    1. John says:

      Countrywide received numerous awards for Customer Service, place to work, etc and look where they are now!!!

  9. Allison smith says:

    It irritates me that I pay lenders (who create a different referring company ) a 35% referral fee when they send me a client. However, I am unable to charge them a 35% referral for for every client I bring to them. It just isn’t right. If it’s illegal, it should be illegal for all.

  10. Ann Wilkins says:

    Wow – where is all this kick back money? I would never expect to receive money from a lender or from a Title/escrow company but maybe the brokerage does but that just doesn't seem to happen since RESPA. Of course I had three lenders come by my broker's tour and leave candy and rate sheets. I just want a good lender who closes on time and keeps me informed of any issues. Who is pleasant and responsive to my buyer. Some lenders are just head and shoulders above the rest. Usually I do select the Title company and that is based on my experience with escrow officers. They differ – some are just so much more responsive and on top of things than others. I sell houses and just want the best experience for my buyers.

  11. Greg Herman says:

    Nice Frank and Brian. Let's just get lending down to rate shoppers only. O and by the way, your Realtor's commission, it shouldn't be based on how good they are or if you trust them, you need to find the Realtor who works for $499 a deal. That's what you say when you tell people to shop for rate. It's not about trust or reputation , it's about rate. Bigger fools than the government.
    As for MSA's, no to the bucks based on volume. However, brokers are constantly asking for this and they are constantly changing looking for more money. Pay for the receptionist, pay for our bus to the race track, pay for the Christmas party at the big hotel. Clean up that house and maybe you might have a fighting chance.

  12. Marcus says:

    The CFPB does not keep a dime of any penalty or settlement money. There is no “gravy train”. It all goes to the Treasury. The CFPB gets 100% of their funding and operational budget from the Federal Reserve based on a formula. Seriously, Frank and Brian, you should know better than to pass on nonsense like this. It makes us all look bad when trying, legitimately, to argue against CFPB’s policies. Do your research.

    RE MSAs. Even if you have the deep pockets to fight the CFPB, an MSA isn’t worth it. The big banks have made this quite clear by bailing out of all MSAs. Does anyone really think they know better?

    1. admin says:

      Marcus, I think we’d be foolish to think the that government isn’t looking at how much money the CFPB brings in compared to how much it cost to run it. Regardless of where the fine money goes or where the operation budget comes from, it’s money in and money out. With respect to policies we feel some are out of line with what makes good sense for the mortgage and real estate industry and we will most definitely argue against them, to absolutely no avail of course since they have zero regulation themselves. With that said, we also believe the CFPB does a lot of good for the consumer. Believe me Marcus, we do our research. Thanks for comment though! Keep ’em coming. This is all good dialog. ~ Frank

  13. Andy Harris says:

    All MSA's violate Section 8 of RESPA (no matter all the excuses we hear) and at minimum violate ethical practices. Bottom feeders are the only ones that enter these agreements. You don't need these agreements if you operate a good ethical business with credentials and experience. Real Estate company ignorance and arrogance is where regulators need to attack the greed… not just on the greedy lender side that violate by entering these "agreements".

  14. Tim Lord says:

    I hate acronyms. What is MSA? Here in Indy it means Market Square Arena.

    1. admin says:

      Marketing Service Agreement. Where settlement providers have agreements with each other to cross promote each other. There are many different ways this is accomplished. The issue is if one provider is literally “paying” another provider for business. This is a RESPA violation. “Paying” can be actual pay for a referral or reducing fees for referrals. Or paying rent to be in an office that’s grossly under market or increasing rents based on business referred. These are typical “not legal” arrangements.

  15. JV says:

    We have an attorney who understands RESPA laws/policies review our MSA agreements to make sure they’re in compliance. Determining the “value” of co-marketing is pretty tough, so best have an expert draw the terms up for you to make you’re in compliance. MSAs should always be based on a flat rate no matter how much business is done between the agent and vendor.

    1. Leslie says:

      Just because you have an attorney does not mean necessarily that you are not in violation of the law. The attorney will not be fined/go to jail, YOU will, if your MSAs are deemed illegal by the CFPB. I have known people who assumed and trusted that the attorney knew it all and they ended up in jail! Seriously, as with anything, some attorneys are better than others…

  16. In 25 years as a mortgage broker, I have always declined offers of referral fees and I've never paid one. If I refer a valued client to a realtor, title co or other vendor, it is because I believe that person will do the best job for them and I expect that anyone referring to me is doing it for the same reason. I recently had a long term client purchase a home in a Pulte Homes subdivision. He got their Pulte Mortgage quote and compared it with mine. Even with the $5000 incentive offering for using their in house lender, the rate was way worse. In order to cover all their kickbacks, they had to jack the rate up to get in the neighborhood of a 5-6% ysp. And even though they had the client sign disclosures assuring them that they could choose any lender they wanted and the only ramifications for not choosing Pulte Mtg was not getting the incentive; the pressure applied through out by the sales agent was ridiculous. My client, a retired cop, had the gumption to tell her to STFU repeatedly, but most consumers would have buckled under the pressure and ended up spending far more over 30 years. MSAs are dirty.

  17. Frank Dowd says:

    By your analysis well over 50% of real estate brokerages would qualify as bottom feeders in our market.

  18. Andy Harris says:

    Frank Dowd That would be 93% in my market in Oregon

  19. When are they going to prohibit builders from tying huge incentives toward closing costs or upgrades to the use of their preferred or in-house lender? Definantely steering with the use of financial incentives to do so. Not fair at all! Comments anyone?

  20. Does paying for a realtor's Zillow account fall under this category? I know quite a few LO's who do this. And I have been asked as well.

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