[Anonymous]

We are considering entering into an agreement with a Realtor to do joint advertising on two local housing websites. If the potential borrower clicks onto a link that they would like to talk to a local lender, their information would be forwarded to one of three local lenders (us being one) on a rotating basis. We would pay a flat fee for this service. I know that RESPA does not prohibit joint advertising as long as one party is not paying less than a pro-rata share for the adversting. Any suggestions for how we measure this? I haven’t seen how this would look on the website, so I don’t know what portion of the advertising we receive benefit from. It sounds like the REALTOR always benefits, but we only benefit 1/3 of the time the applicant clicks on the link. So would we expect the REALTOR to pay 1/2 fee, and we lenders pay 1/6 (1/2 split three ways?) Anybody have experience with this type of adverstising?

[rcooper]

If you proceed with this I recommend you have documentation from the web-company sellingn the advertising showing the percentage of advertising split between all parties and what the fair market value is for each percentage.

[Anonymous]

Does it make any difference that I accessed the two websites and discovered that both of them go to the Realtor’s website? We have hired a new lender who used this at his former bank, and it got a lot of loan referrals this way.

How it works is if someone chooses the “Finance” tab then it takes them to a page with Bank/Lender #1’s information, with a section to fill in if they want to be contacted. If they go back and do it again (without filling in any information), then they get the 2nd Bank/Lender’s information. If we agree to this contract we would be the third. Apparently it just rotates the three different lender’s information based on choosing the “Finance” tab. It doesn’t appear to be affected by whether the potential borrower submits information or not. As an FYI, the other two lenders are from big banks. We are a small community bank. I don’t want to smash this referral source, but I don’t want to violate RESPA by paying a “settlement service provider” for referrals, and this seems like what we are doing. Or are we paying for advertising? We wouldn’t be giving this realtor’s referrals any better terms than we would anyone else.

[rcooper]

Hmm…that sounds like you would be paying them for a referral. I’m asking Jack to offer his thoughts, so you should hear from him soon.

Thanks for your patience.

[rcooper]

After discussing this with Jack, we both agree that from the information you’ve given the arrangement appears more as a paid referral than a joint ad. If you intend to proceed we suggest a call to your federal regulator and/or to the CFPB. Caution is needed though, if the regulators realize that this is an active arrangement both of the existing participating banks and the realtor could end up on the wrong end of an enforcement action and penalties if the regulators deem it a prohibited referral.

[Author]

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