U.S. consumer watchdog rescinds ban on mortgage marketing deals By Reuters

World economic prospects darken, rebound delayed: Reuters poll By Reuters



By Michelle Price

WASHINGTON (Reuters) – The U.S. consumer watchdog said on Wednesday it was rescinding guidance that had effectively banned joint marketing agreements between mortgage lenders, realtors and other home buying service providers, saying it did not provide necessary “regulatory clarity” on how to comply with the law.

The move is another boost for the mortgage industry, which has long lobbied against the guidance, and is the latest example of the Trump administration rolling back Obama-era consumer protections. The industry has complained that the Consumer Financial Protection Bureau’s 2015 guidance was unclear and had misinterpreted federal laws that bar kickbacks or referral fees that could increase the cost of buying a home.

The CFPB said it was replacing the guidance with a document on “Frequently Asked Questions.” The agency emphasized the move did not mean that such marketing arrangements are “per se or presumptively legal” and should be reviewed on a case by case basis.

Such “Marketing Services Agreements” involve mortgage originators and title insurers, hungry for sales leads, paying a real estate broker or homebuilder to promote their services and products, or to rent a desk in their offices.

Under the administration of former President Barack Obama, the CFPB had cracked down on these agreements, saying they frequently violated the 1974 Real Estate Settlement Procedures Act (RESPA), which bars giving or receiving anything of value in exchange for referrals for homebuying services such as mortgages, title insurance and appraisals.

While co-marketing arrangements are not illegal under RESPA, the CFPB’s then-director, Richard Cordray, found many were used to disguise an illegal referral fee as compensation for marketing or advertising services. Such fees create conflicts of interest that could prevent borrowers from getting the best rate, according to consumer protection experts.

Reuters reported https://br.reuters.com/article/us-usa-cfpb-mortgages/as-u-s-watchdog-retreats-mortgage-firms-reprise-cozy-marketing-arrangements-idUSKCN1VC1JO last year, however, that many mortgage firms were getting back into these agreements, betting that the CFPB under President Donald Trump’s administration would take a lighter touch on the issue.

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