For example:. MSAs may involve only settlement service providers or may also involve third parties who are not settlement service providers. For example, an MSA exists when a mortgage loan originator agrees to market or promote the services of a real estate agent in return for compensation.
A lawful MSA is an agreement for the performance of marketing services where the payments under the MSA are reasonably related to the value of services actually performed. This is distinguished from an MSA that—whether oral, written, or indicated by a course of conduct, and looking to both how the MSA is structured and how it is implemented—involves an agreement for referrals. Moreover, when a person performing settlement services receives payment for performing marketing services as part of a real estate transaction, the marketing services must be actual, necessary, and distinct from the primary services performed by the person.
These marketing services cannot be nominal, and the payments cannot be for a duplicative charge or referrals. Whether a particular activity is a referral or a marketing service is a fact-specific question for purposes of the analysis under RESPA Section 8 a. As discussed in RESPA Section 8 a FAQ 1, referrals include any oral or written action directed to a person where the action has the effect of affirmatively influencing the selection of a particular provider of settlement services or business incident thereto by a person paying a charge attributable to the service or business.
For example, referrals include a settlement service provider directly handing clients the contact information of another settlement service provider that happens to result in the client using that other settlement service provider. In contrast, a marketing service is not directed to a person; rather, it is generally targeted at a wide audience. For example, placing advertisements for a settlement service provider in widely circulated media e.
For example, this can include but is not limited to agreements structured or implemented to provide payments based on the number of referrals received. Under RESPA Section 8 b , if the MSA serves as a method of splitting charges made or received for real estate settlement services in connection with a federally related mortgage loan, other than for services actually performed, the MSA or the conduct under the MSA is prohibited.
MSAs violate RESPA Section 8 b if they disguise kickbacks by purporting to provide payment for services, but a split charge is paid even though the person receiving the split charge does not actually perform services. Similarly, a violation of RESPA Section 8 b occurs if the services are performed, but the amount of the split charge exceeds the value of the services performed by the person receiving the split.
However, under RESPA Section 8 c 2 , if the MSA or conduct under the MSA reflects an agreement for the payment for bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed, the MSA or the conduct is not prohibited. RESPA Section 8 c 2 does not apply to MSAs that involve payments for referrals because they are not agreements for marketing services actually performed. However, RESPA Section 8 does not prohibit payments under MSAs if the purported marketing services are actually provided, and if the payments are reasonably related to the market value of the provided services only.
Note that under Regulation X, the value of the referral, i. As stated previously, an MSA can be lawful under RESPA if it is structured and implemented consistently as an agreement for the performance of actual marketing services and where the payments under the MSA are reasonably related to the value of the services performed. However, as discussed in the FAQs above, MSAs can be unlawful when entered into based on their structure or can become unlawful based on how they are implemented.
For example, assume a lender enters into an MSA with a real estate agent that also makes referrals to the lender. The MSA requires the real estate agent to perform marketing services, including deciding on and coordinating direct mail campaigns and media advertising for the lender.
In this scenario, the lender and real estate agent would not meet the standard in RESPA Section 8 c 2 , because the marketing services are not actually provided, or the payments are not reasonably related to the value of the marketing services provided. Skip to main content. Updated Oct. These include: Fees paid to attorneys for services actually rendered.
Fees paid by a title company to its duly appointed agent for services actually performed in the issuance of a title insurance policy. Fees paid by a lender to its duly appointed agent for services actually performed in the making of the loan.
Bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed. Affiliated business arrangements, subject to specified conditions. Other payments and classes of payments adopted by regulation after consultation with other specified federal agencies and officials. Under RESPA Section 8, can a lender or other settlement service provider give a gift, refund, or discount to a consumer for using that lender or provider?
Show Hide Generally, yes. Other federal and state laws may also have restrictions that apply and should be consulted. Fee, kickback, or thing of value. Regulation X defines the term to include, without limitation: monies, things, discounts, salaries, commissions, fees, duplicate payments of a charge, stock, dividends, distributions of partnership profits, franchise royalties, credits representing monies that may be paid at a future date, the opportunity to participate in a money-making program, retained or increased earnings, increased equity in a parent or subsidiary entity, special bank deposits or accounts, special or unusual banking terms, services of all types at special or free rates, sales or rentals at special prices or rates, lease or rental payments based in whole or in part on the amount of business referred, trips and payment of another person's expenses, or reduction in credit against an existing obligation.
Pursuant to an agreement or understanding, oral or otherwise. An agreement or understanding need not be written or verbalized. It may be established by practice, pattern, or course of conduct. For example, when a thing of value is received repeatedly, and connected in any way with the volume or value of business referred, receipt of the thing of value is evidence that it is made pursuant to an agreement or understanding.
For referrals of business. That effect can be on any person in connection with the settlement service or business incident thereto who will pay for the service or a charge attributable, in whole or in part, to that service or service provider. Additionally, referrals include requiring the use by the person paying for the service of a particular provider of settlement service-related business.
Finally, note that prohibited referrals are not limited to those directed to consumers. They might be directed to a number of sources, such as appraisers, real estate agents, title companies and agents, lenders, mortgage brokers, or companies that provide information in connection with settlements, such as credit reports and flood determinations.
Incident to or part of a real estate settlement service involving a federally related mortgage loan. Upcoming Events Calendar. The European Quality Label as proof of our overall excellent institutional performance Discover More.
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