Putting Teeth In Kickback Prohibitions
RESPA has always prohibited kickback schemes. Specifically, RESPA explains that ”No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.” 12 U.S.C.A. § 2607 (West). But figuring out where the line is between legitimate salesmanship and illegal kickbacks has always been a gray area and RESPA enforcement has always been a tad lax.
Yesterday provided examples of how RESPA says what it means and means what it says. The Bureau That Never Sleeps and the Maryland AG sued originators over an alleged referral kickback scheme (http://www.consumerfinance.gov/newsroom/cfpb-and-state-of-maryland-take-action-against-pay-to-play-mortgage-kickback-scheme/). Closer to home, Governor Cuomo and New York’s Department of Financial Services proposed tough new regulations that would, among other things, prohibit title insurance companies from providing meals and entertainment expenses to loan originators (http://www.dfs.ny.gov/insurance/r_prop/rp208t.pdf).
First, let’s talk about the RESPA violation. The CFPB and the Maryland AG are suing Genuine Title, a now defunct Maryland company that offered closing services. It’s alleged that the company provided loan officers with marketing services “including purchasing, analyzing, and providing data on consumers, and creating letters with the loan officers’ contact information” and that in return, the loan officers would refer homebuyers to Genuine Title.
RESPA stands for the simple proposition that you can’t get something for nothing. If an originator is getting a fee for doing nothing more than referring business, then something is wrong.
As for New York State, it is moving to clamp down hard on title insurance practices that it believes drive up the cost of title insurance and limit consumer choice. The Governor doesn’t always get quoted in DFS press releases. Here is an indication of how strongly the administration feels about the amount of gift giving going on in the title insurance industry.
“New Yorkers should not have to foot the bill for outrageous or improper expenses made by title companies just to refinance or close on their home,” Governor Cuomo said. “Our administration will not stand for that kind of abuse in the title insurance industry, and these new regulations will help ensure that New Yorkers are protected from unfair charges and get the most bang for their buck.”
The proposed regulations would prohibit title insurers from offering inducements to get business including: meals and beverages; entertainment, including tickets to sporting events, concerts, shows, or artistic performances; gifts, including cash, gift cards, gift certificates, or other items with a specific monetary face value; travel and outings, including vacations, holidays, golf, ski, fishing, and other sport outings; gambling trips, shopping trips, or trips to recreational areas, including country clubs; parties, including cocktail parties and holiday parties and open houses. THIS IS NOT THE COMPLETE LIST
Suffice it to say it’s about to get a lot less fun dealing with title insurers in NYS.
Here is a link to the proposal: http://www.dfs.ny.gov/insurance/r_prop/rp208t.pdf
NCUA Board meeting today
Here is a quick reminder that the NCUA is having a board meeting today. Among the issues on the agenda are a vote on a final rule amending common bond requirements for associations and proposed regulations for IOLTA accounts. Remember that federal law now authorizes credit unions to open up Interest on Lawyer Trust Accounts. The regulation will presumably describe what accounts are similar enough to IOLTAs that they can also be offered by credit unions.
It was nice seeing so many of you at the State GAC over the last couple of days. Great job!