Reverse Mortgage Marketing

Backward mortgage marketing

Mortgage and real estate industry on-call | Insights and incidents - Marketing service agreements pose a major compliance risk CFPB today published Bulletin 2015-05 (Bulletin), which describes CFPB's policy on the use of Marketing Services Agreements (MSAs) by mortgage banks and clearing houses. It is important that the CFPB does not adopt a new Act in its Bulletin. The Bulletin does not prohibit any MSA. The clear message from CFPB, however, is that an MSA is unfavourable, represents a significant potential source of regulatory credit risks for those entities that use it, and that CFPB has significant issues regarding the capacity to fully and accurately verify that the conditions of an MSA are implemented in full accordance with the ABM.

The Bulletin says what? This Bulletin provides a comprehensive review of the ban of the Real Estate Settlement Procedures Act (RESPA) on brokerage charges in the processing sector and identified the MSA as agreements that are designed as payment for advertisement or promotion activities that may actually constitute a concealed remuneration for references.

An MSA may exist between clearing houses, such as creditors, property brokers/brokers or security firms, or between a clearing house and non-billing houses, such as member organisations. It is noted in the Bulletin that determining whether an MSA infringes RESPA will require a factual investigation, and determining that an order infringes RESPA will not necessarily require the same findings to be followed in another MSA assessment.

However, the CFPB observes that when an asset is bartered for the provision of processing brokerage support, the agreement is'likely to violate RESPA', whether or not an MSA is part of the deal. This bulletin examines the recent CFPB implementation measures taken in relation to MFIs which, as CFPB claimed, have been designed in return for the transfer of transactions which inadmissibly direct the consumer to a particular resolution vendor and which have not led to the provision of the contracted MFI related execution agency activities.

There is no need for immediate payments - an execution measure was taken against a security firm that covers the marketing costs of credit clerks in return for arranging security papers. Furthermore, for the MSA to be a problem, there is no need for face-to-face marketing. The CFPB is also interested in targeting advertising campaigns on other processing services to create more ASAs.

The Bulletin, what's it omitting? Bulletin has failed to establish that an MSA is unlawful. Although the Bulletin does not take this drastic move, the Bulletin's sound and comments suggest that the CFPB considers that a fully conforming MSA is the exceptional rather than the standard.

Bulletin does not state that an MSA must be cancelled and that all prior arrangements are inconsistent with RESPA. The Bulletin observes however, that " various mortgage sector stakeholders have made public their commitment that the risk and complexities of MSA design and supervision for RESPA conformity are outweighed by the advantages of concluding them.

" Bulletin urges all members of the mortgage sector to consider the demands, limitations and negative impacts of RESPA that may arise from non-compliance. The CFPB's clear priority is to restrict or remove the use of an MSA. This Bulletin is the CFPB's first non-enforcement policy in relation to MSA.

Whereas the mortgage sector used to suspect that execution measures were factually peculiar, CFPB and other regulators can now refer to the Bulletin to prove that the mortgage sector is aware of the risk associated with the use of an MSA. Members of the sector should be aware that the use of MFIs will lead to increased control during CFPB audits and may lead to more significant assertiveness.

It is likely that the CRPB and other regulative investigations will deepen previous relations and examine closely the service provided by those participating in an MSA. Bulletin notes that risk associated with an MSA is "less likely to be monitored through close supervision than mortgage sector professionals have identified in the past.

" Given the challenge of third-party supervision, it is sensible to believe that the CFPB can come to the conclusion that the very need for such supervision is a weak point in an institution's compliance management system. The CFPB states in a careful wording that severe pressure can result in hazardous behaviour that could harm RESPA, even in cases where MSA conditions have been elaborated with care to be in technical compliance with RESPAs.

" This latter last idiom should give members of business a break from the mob. The wording implicates that the CFPB is very sceptical about the MSEs by proposing that it is possible to adhere to RESPAs in technical terms through well-documented arrangements, but points out that these arrangements are nevertheless merely tools for evading the legislation.

Where the CFPB genuinely considers that all MCAs are aimed at circumventing the RESPA rules, the sentences contained in execution measures resulting from activities after the publication of the Bulletin may be harsh. If the CFPB is encouraging industries to "carefully consider the RESPA obligations and limitations and the negative effects that non-compliance may have", respondents should bear in mind that RESPA infringements may lead to potential penalisation.

Mehr zum Thema