The Rules of the RESPA Road: Compliant Strategic Alliances

It has been two years since the DC Circuit issued its decision in PHH Corporation, et al. v. Consumer Financial Protection Bureau affirming the legal landscape of service arrangements between settlement service providers under the Real Estate Settlement Procedures Act (“RESPA”). It’s also been nearly two and a half years since the Consumer Financial Protection Bureau (“CFPB”) announced a consent order related to Section 8 of RESPA. As a result of the PHH decision and this lack of recent CFPB enforcement, many settlement service providers, including real estate brokers, mortgage lenders, and title insurance and closing entities, have renewed interest in creating strategic alliances or partnerships between or among companies that refer settlement service business. Interest in these alliances in an inactive enforcement environment can lead companies to push the envelope, but compliance with Section 8 of RESPA is imperative to ensure these strategic alliances do not create unnecessary legal and compliance risk.

This article, originally published in The Review of Banking & Financial Services, discusses the referral fee prohibition under Section 8 of RESPA and two popular exceptions under Section 8 that permit certain strategic alliances. In addition, the article provides practical tips based on regulatory guidance to ensure new or existing strategic alliances comply with RESPA.