Advertising services agreements used to be looked at with suspicion as thinly-disguised kickbacks.
A 2015 bulletin on RESPA compliance with marketing services agreements (MSAs) led to some large mortgage lenders to get out of MSAs entirely because of increased regulatory scrutiny.
But now that the Consumer Financial Protection Bureau has rescinded the controversial bulletin, interest in advertising agreements is likely to pick up once again.
October Research, LLC recently put together a webinar, “Mastering MSAs,” with two industry experts who detailed the do’s and don’ts of such agreements – and how RESPA compliance is just as important as ever.
“One of the advantages of an MSA vs. an affiliated business arrangement is that there’s no capitalization involved,” Sterbcow Law Group Partner Marx Sterbcow said. “If you were doing an affiliated business, you would have to put up 50 thousand, 60 thousand, 100 thousand, maybe 200 thousand dollars.”
Sterbcow said a second benefit is that advertising agreements require no additional employees or office space.
“And the payment is not tied to the volume of business that is referred,” he added.
Ray Cashen, senior vice president of settlement services and general counsel at William Raveis Real Estate, said compliance goes beyond just hiring a qualified RESPA attorney to put deals together.
“Implementation is key,” Cashen said. “If you have a valid MSA which checks all the boxes of what you should be doing under RESPA guidelines - but the implementation is off the rails and problematic and doesn’t remotely resemble what’s in writing - there’s going to be a problem.”
The duo also discussed what a compliant MSA looks like today, possible election side effects, and distinctions in agreements with individual real estate agents vs. brokerage firms.
Visit RESPA News to order a recording of “Mastering MSAs.”