Consumer Finance Protection Bureau Fines Mortgage Company and Real

Estate Brokerages for Violations of RESPA Arising Out of Market Service Agreements


Recently, the Consumer Finance Protection Bureau (“CFPB”) fined Prospect Mortgage $3,500,000 and two (2) real estate brokerages $230,000 for violations of RESPA arising out of the use of Market Service Agreements (“MSAs”).  Specifically, CFPB found the agreements to violate RESPA in the following respects:


1.         Used lead agreements to pay brokers for referrals;


2.         Used MSAs to pay brokers for referrals;


3.         Used licensing agreements to pay brokers for referrals;


4.         Encouraged brokers and agents to require consumers to obtain loans through pre-approvals from Prospect;


5.         Paid servicers for referrals;


6.         Used third-party website advertising to pay real estate brokers for referrals; and


7.         Encouraged brokers to use fees and credits to pressure consumers in to using Prospect.


This appears to be the first time that CFPB has found MSAs to be in violation of RESPA.  Real estate brokers and lenders entering into MSAs should be extremely cautious in light of this action.


Shannon B. Jones, Partner