Good afternoon —
For a recent piece published on RealTrends, I did a deep dive into the 1974 Real Estate Settlement and Procedures Act (RESPA) and the way it's being interpreted and enforced today. Through my reporting, I learned just how vast and confusing the gray areas of RESPA's Section 8 are, leaving it incredibly unclear what is or isn't allowed.While joint ventures, marketing service agreements and even a brokerage owning a mortgage or title company are all clearly allowed, when it comes to educational activities, things get truly perplexing.
Although "normal promotional and education activities" are allowed under RESPA - as long as the people being educated have not agreed to provide services in exchange or pay for expenses "that otherwise would be incurred by the referral source" - there is nothing outlining what constitutes a permissible promotional or educational activity.
In fact, on the National Association of Realtors RESPA "Frequently Asked Questions" page, under: "Can a title/mortgage company sponsor a luncheon for real estate professionals and offer continuing legal education?," NAR writes: "Maybe," adding "the rule of reason should be applied."
In conversations with legal experts, the "rule of reason" concept came up frequently.
Stephen Gottheim, the general counsel at the American Land Title Association, said that he tells title executives to consider "degrees of reasonableness" when planning a function.
"When you start to add some additional components to the seminar, or you start giving a continuing legal education class and you are not charging for the CLE credits when most other providers in the area do, things get more problematic," Gottheim said.
Compounding this lack of guidance is the fact that the CFPB has not issued a RESPA Section 8 enforcement action since 2017, when the agency fined Meridian Title Corporation $1.5 million for a purported scheme involving mortgage and title kickbacks.
Personally, I would find this lack of clarity and precedent extremely frustrating. How do you follow the rules if the rules are seemingly up for interpretation?
If you have thoughts on how RESPA is being interpreted or enforced, feel free to email me at brooklee@hwmedia.com.
Until next week,
Brooklee Han
Real Estate and Title Industry Reporter
brooklee@hwmedia.com
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