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DLP Closing Services president gives compliance advice in 'hot' affiliated business market

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Industry News
Thursday, July 29, 2021
Editor’s Note: This is part of our continuing series on affiliated companies. Our goal is to feature companies which have had history and experience with affiliated business to learn about their success and share the RESPA compliance lessons they have gained in these affiliations over time.

In 2006, Don Wenner earned his real estate license and launched the company’s first affiliated business, DLP Realty.

Two years later, Wenner flipped 20 homes and sold 200.

In 2009, Wenner founded DLP Real Estate Capital, a private financial services and real estate investment company. With two headquarters, one in Bethlehem, Pa. and another in St. Augustine, Fla., the company has been on Inc. 5000’s list of fastest growing companies for eight years in a row and has more than $1.5 billion in assets under management.

Since founding DLP Real Estate Capital 15 years ago, Wenner built a portfolio of affiliated businesses focused on real estate lending, real estate investing, property management, construction management and title services with St. Augustine, Fla.-based DLP Closing Services.

“Our CEO really saw a benefit in having a streamlined process across the board to handle all these closings,” Amanda Dean, president of DLP Closing Services, told RESPA News. “The best benefit that affiliated organizations bring in my eyes is the ability to set up streamlined processes that benefit not only the company – but the customer. If they’re working with one of our affiliated businesses, we have the system down in how we handle orders, how we accept those orders and how we get additional information to allow us to process those transactions. So, basically, you’re able to establish nice, compliant workflows between the different businesses, and it just really makes a seamless experience for everybody involved.”

Pump the brakes

Dean also is a real estate and title insurance attorney who has helped title companies refine closing procedures and assimilate to the new Consumer Financial Protection Bureau (CFPB) climate and TRID mandates. When it comes to RESPA compliance, Dean has evolved over time in her approach.

“In the past, I used to get very excited when I’d be approached about one of these partnerships,” she said. “You’re thinking, `Wow, we can make all this money, really leverage these great partnerships, and it will be a piece of cake.’ More recently, and after gaining further experience, when I’m approached with these opportunities, I kind of pump the brakes. I think of actual RESPA compliance before even deep diving further into those discussions. I wouldn’t even start real conversations with a potential partner until the compliance aspect was covered, to basically feel out how each partner receives that RESPA compliant message.

“It’s almost like a little test in the beginning. If I get pushback during those talks, even after I’ve explained the `why’ of running the business this way, the talks usually don’t go any further.”

Dean said the first question she would now have for potential AfBA partners is how the potential partner feels about RESPA compliance. She added that other DLP executives – including the CEO, chief legal officer and CFO – generally back her decisions on compliance.

“They protect that compliance with the same heart and ferociousness as me,” she said. “For instance, we’re moving into a new building and the CEO’s first question was what do we need to do to that space to make it RESPA compliant? That's a blessing. And so I absolutely knew that this was the right place to be. This group wants to do it the right way.”

Dean said in the beginning stages of talks with potential affiliated partners, oftentimes the pushback to RESPA compliance is simply an education issue.

“You don’t want to lose the business opportunity, so I always cover twice why we’re doing what we have to do, and see if that changes minds,” she said. “But if they don’t get past it, you know it’s not a right fit and you will constantly be swimming upstream in that partnership, putting your and your team's licenses at risk.

“Back in the day, I used to get all down the road on numbers and we’d be all excited. And more recently I’ve shifted gears to have that RESPA talk out of the gate. It really helps you find the right partner.”

Enlist the experts

Dean said she has noticed a significant increase in title agencies hoping to start joint ventures.

She recommends companies in such partnerships to start with documenting and implementing a compliance operating system of strict policies and procedures that are consistently updated and regionally appropriate as they grow and scale. Some of this may require use of additional compliance vendors.

“You can't rest on your laurels with RESPA,” she warned. “We work with experts and compliance vendors and RESPA counsels to see if they’re seeing decisions come down in the courts, and if we need to tweak our practices and procedures. And then my team rolls out that implementation, with training backing it up. This just isn’t really a space that you can be lax, with constant changing rules and regulations.”

Enlisting experts was a learning curve for Dean. In the beginning, she felt she could stay on top of RESPA herself as a real estate and compliance attorney.

“I think you’ve got to realize that’s awfully pretentious to think that you can do that,” she said. “Personally, I bring in a compliance vendor and have RESPA attorneys on retainer at all times. I’ve been doing that because as we scale into different states, it would be awfully pretentious for me to think that I could stay on top of those changing laws and regulations core rulings in all 50 states, that’s just virtually impossible. Yeah, you’re setting yourself up for failure. I highly encourage people to surround themselves with that team of real experts in this area that help keep you up with real time changes and best practices.”

Dean said she gets a lot of phone calls from title people all over the country asking for advice on starting joint ventures or AfBAs and is happy to help anyone – even her competitors.

“We owe it to the industry in the space to make sure folks are doing it right,” she said.

When Dean is asked for help, she usually explains starting such partnerships is a three-prong approach.

The first step is slow down to make sure a potential partner is on board with the RESPA test. The second is to educate them on the importance of compliance and the third is to be willing to walk away.

“The market for affiliate partnerships is so hot right now,” Dean said. “I typically assure them this won’t be the last one you’ll be approached with and that someone else will come along. If you’ve laid out the rules, and your potential partner isn’t getting it in those initial talks and even after further education, you’re saving yourself a major headache by moving on – and possibly saving your team’s licenses. If you align with a partner, do it the right way.

“Some people want to hold this information to their chest, but I want to get it out there. When affiliated partnerships were having these problems long ago with RESPA, it was because people were not doing it the right way. Now that the CFPB has provided all this clear guidance, they’re ramping back up again, and most people are doing them the right way. But we want to keep it that way or these opportunities could end for all of us.”

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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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