This article concerning Marketing Service Agreements, or MSA’s, was written by Warren Goldberg, President of Mortgage Wealth Advisors and is being shared with his permission.
What is an MSA or Marketing Service Agreement? ‘The residential mortgage origination industry has long used Marketing Services Agreements (MSAs) to establish the terms of certain marketing arrangements. An MSA, written or oral, addresses the terms according to which a provider of residential real estate settlement goods or services will be paid for delivering general marketing services to another provider of goods or services related to the settlement of a residential mortgage loan.‘
‘ATTN Realtors: Your Company’s Marketing Service Agreement Puts YOU at Risk!‘
In 2015, I wrote and published an article warning Realtors against the dangers of entering into Marketing Services Agreements (MSA’s) with lenders, title companies, or other service providers covered by RESPA (The Real Estate Settlement Procedures Act). An MSA is a relationship between a real estate broker or developer and a title company and/or mortgage company whereby the real estate office agrees to market the service of the title company or mortgage broker in exchange for a “marketing” fee. (Read, ATTN Realtors: Is Your Company’s Marketing Agreement RESPA Compliant?)
My article reported several rulings which resulted in hefty fines against lenders, a home builder, and a title company.
Since publishing that article, the CFPB (Consumer Financial Protection Bureau) has continued its enforcement actions with a vengeance.
Over the past few years, the CFPB has targeted MSA’s numerous times, fining lenders, mortgage brokers, title companies, real estate offices, and even individual loan officers and real estate agents for alleged illegal compensation and other violations related to MSA’s! These fines include:
- A $54,000 fine against a Missouri mortgage broker
- A $50,000 fine against a REMAX office
- A $180,000 (that’s one hundred eighty thousand) fine against a Keller Williams office
- An $85,000 fine against an individual Wells Fargo mortgage loan officer!
The CFPB has clearly stated, “Any agreement that entails exchanging a thing of value for referrals of settlement service business involving a federally related mortgage loan likely violates RESPA, whether or not an MSA or some related arrangement is part of the transaction.” In fact, the CFPB expanded on this, stating that a referral of settlement services between or to affiliated businesses or joint venture owners is a violation of RESPA, even if the businesses are part of the same company! (In other words, business exchanged between real estate, mortgage, and abstract companies owned by the same entity is likely a RESPA violation.)
In a Q&A forum on the National Association of Realtors® (NAR) website concerning RESPA violations, NAR addressed the use of MSA’s with this ominous statement: “…The CFPB has been active in initiating enforcement actions in this area and appears to take the view that these agreements are going to almost always be an improper referral fee, so anyone entering into an MSA will need to exercise extreme caution.”
While the CFPB has not yet clearly condemned MSA’s as illegal, they’ve certainly made it clear that they view the entire business model with suspicion. And based upon the CFPB’s recent activities, it appears that the CFPB may be another step closer to banning MSAs altogether. Until the CFPB takes such action, real estate offices and agents alike should reevaluate the risks of MSA’s as well as the risks of working with these associated service providers.
- Who is your underwriter?
- What is the claims experience of your title insurance provider?
- Do you know whether the non-title insurance premium fees you are paying are fair and reasonable?