FDIC Highlights RESPA Section 8 Violations in Compliance Report
June 25, 2019
The Federal Deposit Insurance Corp. (FDIC) on June 13 published its 2018 Consumer Compliance Supervisory Highlights, which provides a high-level overview of the consumer compliance issues identified through approximately 1,200 consumer compliance examinations conducted in 2018 for non-member state-chartered banks and thrifts.
This report provided anonymized 2018 exam findings showing violations of consumer protection laws. Issues related to compliance with the Real Estate Settlement Procedures Act (RESPA) Section 8 were included in the report.
Specifically, the FDIC noted issues with desk rental arrangements that were used to disguise illegal referral fees. According to the report, "One issue involved institutions that purportedly leased offices or desk space from realtors and home builders, where the amounts paid to realtors and home builders greatly exceeded the fair market value of the rentals. Another issue involved desk rentals that appeared to be sham or subterfuge arrangements to disguise the payment of impermissible mortgage referral fees."
RESPA permits lenders to enter into bona fide marketing and advertising agreements with title and settlement providers, however, such arrangements must be based on fair market value of the advertising and marketing services received. It can’t be used to conceal the payment of illegal referral fees. The FDIC found that certain arrangements, structured as marketing agreements, were actually used to disguise illegal payments for referrals of mortgage business.
The FDIC found similar violations for marketing services and lead generation arrangements. These were the topic of a bulletin from the CFPB in 2015.
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