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RESPerts provide guidance on CFPB digital comparison shopping opinion

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Industry News
Monday, April 24, 2023

Holly Bunting, partner at Mayer Brown, and Kerri Webb, an associate at the firm, shared with RESPA News how the Consumer Financial Protection Bureau’s (CFPB) advisory opinion on dealings with digital comparison shopping platforms has impacted how the industry is approaching their relationships with these entities.

The CFPB’s advisory opinion addressed potential issues with marketing and lead generation arrangements with digital platforms that allow consumers to compare potential mortgage providers. It stated there could be potential RESPA Section 8 violations where the comparison-shopping platforms provide preferential treatment to those settlement service providers who pay more to have their information featured.

Find more information about the guidance, click here.

“The advisory opinion is not really a guide on how to comply with Section 8, but more of a description on how a platform operator may violate Section 8 through particular conduct,” Webb said in a podcast produced by Mayer Brown.

Webb also outlined the three elements the bureau said could result in a RESPA violation: a digital comparison platform non-neutrally using or presenting information about one or more providers; that non-neutral information steering the consumer, or otherwise affirmatively influencing the consumer selection of a provider; and the platform receiving a payment or another thing of value that is, at least in part, for the referral activity rather than for compensable goods or services.

The two members of Mayer Brown’s Financial Services Regulatory and Enforcement practice said the industry found the guidance useful, though it did raise some questions the bureau left unanswered.

“There were some things that the industry hoped the CFPB would have gone a little bit further on,” Bunting told RESPA News. “For example, they made clear in the guidance that a list of one [provider] would be a referral. But the industry was certainly hoping that the CFPB would provide more guidance on what number of providers in a list is a safe harbor or would be sufficient to make the case that it’s not a referral. And the CFPB doesn’t do that.”

The advisory opinion encouraged industry players to do their due diligence when looking for a comparison platform, as behind-the-scenes fee structures or algorithms may result in inadvertent RESPA violations. Bunting said some of her clients have developed questionnaires to submit to the digital platforms with which they do business in order to learn more about their processes and make informed decisions about their marketing partners.

“The reaction we’ve seen the most is folks using it as an opportunity to double-check their compliance, ask additional questions, and make sure that they’re good to go under the guidelines,” she added.

Bunting said she also has clients wondering if the advisory opinion could apply beyond RESPA. The bureau noted potential issues with deceptive information or misrepresentations made by the platforms, raising questions as to whether the guidance could apply to auto lending, as an example, or if there are unfair, deceptive, and abusive practices (UDAAP) considerations that would apply in a context outside of RESPA.

In addition to lenders using questionnaires to better understand their platform partners, clients told Bunting some shopping platforms are looking at their own algorithms and payment structures in response to the guidelines.

“Do the diligence, and ask questions,” Bunting said. “The guidance does a pretty good job listing the kinds of issues that would raise a RESPA concern, and so being able to use those, almost like a checklist, to make sure that a company is comfortable that the platform is designed and operating in compliance with that guidance is that best path forward.”

 

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12 USC Section 2605 or Section 6 is titled Servicing of mortgage loans and administration of escrow accounts. It pertains to qualified written requests, notices of transfer of servicing and the administration of escrow accounts.
An arrangement that involves a person who is in a position to refer business as part of a real estate settlement service and who has an interest in a settlement services provider.

In the arrangement, the person, who has either an affiliate relationship with or a direct or beneficial ownership interest of more than one percent in a settlement services provider, directly or indirectly refers business to that provider or influences a consumer to select that provider.
An arrangement that involves a person who is in a position to refer business as part of a real estate settlement service and who has an interest in a settlement services provider.

In the arrangement, the person, who has either an affiliate relationship with or a direct or beneficial ownership interest of more than one percent in a settlement services provider, directly or indirectly refers business to that provider or influences a consumer to select that provider.
A mortgage disclosure that lists all estimated charges and fees associated with your loan. In addition to fees and charges, it will list your loan amount, mortgage rate, loan term and estimated monthly payment. Your escrows due at closing for insurance and taxes will also be outlined. Mortgage lenders are legally required to provide a GFE within three days of receiving your application.
A mortgage disclosure that lists all estimated charges and fees associated with your loan. In addition to fees and charges, it will list your loan amount, mortgage rate, loan term and estimated monthly payment. Your escrows due at closing for insurance and taxes will also be outlined. Mortgage lenders are legally required to provide a GFE within three days of receiving your application.
Under RESPA Section 2605(e)(1)(B), a qualified written request is a written correspondence that includes: 1) the name and account of the borrower, or has enough information to allow the servicer identify that information; and 2) a statement of the reasons for the belief of the borrower that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.

A QWR cannot be written on a payment coupon or other payment medium supplied by the servicer.
Under RESPA Section 2605(e)(1)(B), a qualified written request is a written correspondence that includes: 1) the name and account of the borrower, or has enough information to allow the servicer identify that information; and 2) a statement of the reasons for the belief of the borrower that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.

A QWR cannot be written on a payment coupon or other payment medium supplied by the servicer.
12 USC Section 2609 or Section 10 is titled Limitation on requirement of advance deposits in escrow accounts. It governs escrow accounts including notifications and statements to borrowers. Section 10 also sets out penalties for those who violate the section.
RESPA Section 3 provides that a thing of value includes any payment, advance, funds, loan, service or other consideration

Regulation X says thing of value includes: monies, things, discounts, salaries, commissions, fees, duplicate payments of a charge, stock, dividends, distributions of partnership profits, franchise royalties, credits representing monies that may be paid at a future date, the opportunity to participate in a money-making program, retained or increased earnings, increased equity in a parent or subsidiary entity, special bank deposits or accounts, special or unusual banking terms, services of all types at special or free rates, sales or rentals at special prices or rates, lease or rental payments based in whole or in part on the amount of business referred, trips and payment of another person’s expenses or reduction in credit against an existing obligation.
A form used by a settlement or closing agent itemizing all charges imposed on a borrower and seller in a real estate transaction. This form represents the closing transaction and provides each party with a complete list of incoming and outgoing funds. RESPA requires the HUD-1 to be used as the standard real estate settlement form in all transactions in the U.S. involving federally related mortgage loans.
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