[Emily G]

Would a campaign that targets realtors by mail, providing a discount on closing costs for their client they refer to us for a mortgage loan violate Section 8/3500.14(b)? Clearly, providing a discount or referral fee to the realtor would, but if the benefit is a clear and direct one to the borrower, and not the realtor, could that potentially run afoul of RESPA as representing some type of backdoor thing of value, or tangible financial benefit, to the realtor?

Part of me thinks that in essence, it amounts to using the realtor as a means of conveying information on a savings to the borrower, kind of like a realtor telling a borrower about a lower rate or special promotion at a certain lender, but part of me worries about how broadly the whole “thing of value” concept could extend given the involvement of the parties.

Thanks, as always, for any thoughts or insights!

[jholzknecht]

To clarify – you are proposing a mail campaign to realtors that offers the realtor’s customer a discount on closing costs. Your concerns are valid. Anything can be a potential Section 8 violation. The arrangement does not provide a direct value to the realtor, but the realtor could increase their transaction volume by promoting the savings available when the customer uses ABC realtor and XYZ Bank. Regulation X and CFPB interpretations do not list this arrangement as a violation, nor do they condone the arrangement.

The discount appears to qualify as a thing of value since the term includes “discount” and “special or unusual banking terms”, and “services of all types at special or free rates.” The term thing of value is broadly defined in section 3(2) of RESPA (12 U.S.C. 2602(2)). It includes, without limitation, monies, things, discounts, salaries, commissions, fees, duplicate payments of a charge, stock, dividends, distributions of partnership profits, franchise royalties, credits representing monies that may be paid at a future date, the opportunity to participate in a money-making program, retained or increased earnings, increased equity in a parent or subsidiary entity, special bank deposits or accounts, special or unusual banking terms, services of all types at special or free rates, sales or rentals at special prices or rates, lease or rental payments based in whole or in part on the amount of business referred, trips and payment of another person’s expenses, or reduction in credit against an existing obligation. The term “payment” is used throughout §§1024.14 and 1024.15 as synonymous with the giving or receiving of any “thing of value” and does not require transfer of money.

The question is whether the ting of value is tied to the referral. The fact that special pricing is offered to all realtors, not just those who make referrals, makes it less likely that an examiner would cite a violation.

You may consider running this by your federal regulator before starting the marketing program. They won’t necessarily provide advance approval, but they would generally share concerns with you.

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