Summer-Fall 2020 Hot Topics

The Bureau Rescinds RESPA Bulletin 2015-05 – Issues FAQs

Loretta Salzano weighed in on the FAQs to RESPA News as follows:

Kudos to the CFPB for rescinding the 2015 Bulletin and replacing it with more practical guidance!

Much of the FAQs is merely a tutorial that spoon feeds the text from RESPA and Regulation X in a more easily digested Q and A format. There are some nuggets that confirm the guardrails and guidance our firm has recommended for years. For instance, the CFPB weighs in on consumer discounts, gifts, contests and provides factors to consider when assessing the permissibility of normal promotional activities.

Not surprisingly, the guidance is vague, poses only easy examples and still does not answer the tough questions. This is both a blessing and a curse. I was troubled to see the CFPB expand the prohibition on normal promotional and educational activities to take into consideration the possibility of future referrals which is contrary to the language in the Regulation, but nor was this a surprise based on historical regulatory examinations and investigations.

It was good to see the CFPB’s repeated reminder that RESPA Section 8 compliance determinations are fact-specific and depend on appropriate implementation. I am astounded by how many in our industry still think having a “compliant” MSA means only the agreement while failing to monitor and document compliance.

Both state and federal regulators have upped their game when examining promotional activities, sponsorships and MSAs. It is no longer enough to show them an attorney-prepared plan or agreement and a third-party valuation. They want details on invitees, attendees, promotional consideration, dissemination of marketing collateral, periodic website impression data and more.

It is interesting that the CFPB poses an MSA scenario regarding a real estate agent and not a real estate broker since we RESPA experts generally advise against entering into an MSA with an agent. Still, I do not think this was intentional or should be construed to “green light” MSAs with agents.

It is also interesting that the CFPB decided to revisit RESPA Section 8 yet omitted any discussion about leads and co-marketing – both of which are hot topics on the RESPA front and where additional guidance would be helpful. My approach has always been “careful what you wish for” when it comes to regulatory guidance on RESPA Section 8, so I am happy to leave well enough alone!

I don’t think the FAQs will cause the industry to jump into or out of MSAs or promotional and educational activities. Instead it should sound the warning alarm to check and adjust systems and controls.

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