RESPA Book

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Welcome Clarity on RESPA

Tips for complying with rules on marketing service agreements.

March - April
2021

Key Takeaways:

  • An MSA is an agreement under which one person or entity agrees to market or promote the services of another in exchange for compensation. An example is a mortgage broker who promotes the services of a real estate broker, or vice versa.
  • MSAs should focus on marketing, not referrals. Marketing is not directed to any one specific person; Instead, it’s targeted to a wider audience.
  • Payments under an MSA should not be based on the number of referrals made to the other party but should instead reflect the fair market value of the marketing services by using factors such as time, difficulty, or the size of the target audience.

In a welcome move for the real estate industry, the Consumer Financial Protection Bureau has issued guidance for how settlement service providers may properly engage in marketing service agreements, rescinding its previous bulletin warning of the substantial legal and regulatory risks presented by MSAs, which caused many real estate professionals to stop using them.

An MSA is an agreement under which one person or entity agrees to market or promote the services of another in exchange for compensation. One example is a mortgage broker who promotes the services of a real estate broker, or vice versa. Real estate professionals must ensure their MSAs comply with the Real Estate Settlement Procedures Act or face fines up to $10,000 per violation and up to a year in prison. Here are four takeaways from the CFPB’s guidance to help you incorporate MSAs into your business while avoiding RESPA violations.

1. MSAs are not illegal per se under RESPA.

The guidance states that 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 performed and are distinguished from unlawful referral arrangements. Determining whether an MSA itself is lawful, or whether payments or conduct under an MSA are, will be analyzed under RESPA Section 8, and as explained in the guidance, will depend on the facts and circumstances.

2. MSAs should focus on marketing, not referrals.

Understanding the difference between referrals and marketing is key to a compliant MSA. Referrals are any oral or written action directed to a person that affirmatively influences the selection of a particular settlement service provider. Marketing is not directed to any one specific person; instead, it’s targeted to a wider audience.

An MSA that pays for the “service” of handing a settlement service provider’s brochure to a client would be impermissible under Section 8(a) because it’s directed at one person and therefore constitutes a “referral.” An MSA that pays for the display of the provider’s brochures in an office lobby or at an open house is permissible as “marketing” because the act is directed to the public.

3. Payments under an MSA must be for actual marketing services.

Section 8(c)(2) of RESPA allows “payment ... for services actually performed.” Such services must not be nominal or duplicative and their performance should be clearly delineated, including how often and by whom, and demonstrable.

For example, if a real estate professional agrees to promote a title insurance agency on social media twice per quarter, the parties should keep a copy of the posts on file. If the services called for in the MSA are not performed, but the agency still pays the salesperson, then the MSA would likely be deemed an impermissible referral scheme.

4. Compensation must be reasonably related to the services performed.

Payments under an MSA should not be based on the value or number of referrals made to the other party but should instead reflect the fair market value of the marketing services by using factors such as time, difficulty, or the size of the target audience.

For example, if a real estate broker agrees to display a mortgage company’s ad on the brokerage website, but the fee is multiple times higher than a non-referring business paid for a similar ad, that would not meet the reasonable value standard, and could be construed as a payment for referrals in violation of Section 8(a). By carefully structuring and implementing MSAs, real estate professionals may continue to use them as a valuable tool to expand networks and build business.

For more information about RESPA, visit nar.realtor/RESPA.

Deanne Rymarowicz

Deanne M. Rymarowicz is associate counsel at the National Association of REALTORS®.

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