Editor’s Note: This is part of our continuing monthly 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. 

Bob Merrick started out in the commercial real estate world as a self-employed appraiser who did a lot of work with properties along the Mississippi River.

Merrick, who is known for always having a sixth sense of being able to look at something and assess the value, acquired New Orleans-based Latter & Blum Inc. in 1986.

Since then, the chairman of the board and his daughter, Latter & Blum President, CEO and Principal Broker Lacey Conway, have expanded the company into the largest independently owned real estate and home services company in Louisiana and the Gulf South, with 25 offices throughout Louisiana, Southern Mississippi and Houston.

Last year, Latter & Blum did about $4.4 billion and 19,000 units in sales volume, including its commercial operation.

“The company is 104 years old. We’ve pretty much touched every part of real estate,” Conway told RESPA News. “We acquire companies with the same brand strength and commitment to the community.”

Latter & Blum was an early adopter of affiliated businesses. The company currently has two affiliated companies. In 1990, they started Latter & Blum Insurance, a 50-50 joint venture with Hartwig Moss Insurance Agency – a more than 100-year-old-company that wrote the first flood insurance policy in the United States. Then in 1998 came Essential Mortgage, which is 100 percent owned by Latter & Blum.

“Affiliated partnerships can be a wonderful thing,” she said. “But there is a commitment of time and energy that you just have to be ready for. These are endeavors that cannot be taken lightly. There are a lot of regulations to keep up with.”

Conway’s RESPA compliance tips            

Conway said making sure real estate agents understand RESPA compliance is a must.

“There are some times when agents don’t always understand why we’re so fanatical about our disclosures and the conversation around affiliated businesses,” Conway said. “Sometimes I think they get kind of annoyed by it. We get tired of hearing ourselves talk about it, too, but you have to. It takes time and effort talking to our agents about the conversations that they need to have with their clients, and sometimes we can get push back for it.

“But it’s our responsibility to communicate with our agents that this is a required form for us, and sometimes that can be a bit of a challenge. Consumers have many wonderful choices of who they can work with, and we are yet another one. Our agents have learned a lot. Our affiliated business representatives really keep our agents sort of in line.”

Another key is simply being aware of the need to implement everything that is required.

“I think the biggest part of the learning curve was when the CFPB really started making changes that seemed unclear,” Conway said. “It is an ever-changing environment.”

Dedicating staff to attend industry conferences to talk about best practices is another company compliance policy, as well as making sure the affiliated business disclosure that goes to each business is up to date and accurate.

“We will not close a contract without having that disclosure in the file,” she said.

Latter & Blum also invites its affiliated businesses to its weekly sales meeting to provide compliance updates to agents.

“We are quick to adopt any change that comes up,” she added. “One of the stories from The Realty Alliance was a little scary. A real estate business didn’t have something capitalized and they got fined. Stories like that scare me because as a company we go through great pains to make sure we dot every ‘I’ and cross every ‘T.’

“You just have to be ready to commit to the time and effort. It’s ongoing. It’s not a set-it-and-forget-it operation. For our affiliate groups, we find the right people who are the experts to make sure lines are drawn and rules are followed.”

One of those experts is Essential Mortgage President Kevin McKeough, who has been at the helm of the affiliate for a year-and- a-half. The company experienced a 16 percent increase in volume in 2019 vs. 2018. So far year-to-date in 2020, the company has seen a 69 percent volume increase over 2019, with no signs of slowing down the second half of the year.

McKeough’s RESPA compliance advice

McKeough said his primary goal is to capture more of the buyer-side transactions that come through the brokerage.

“Just because we’re an affiliate doesn’t guarantee that we’re going to get that business,” he said. “It’s a RESPA violation to mandate customers to go through your mortgage company. It’s highly competitive, and we’re in there competing against all the other mortgage lenders.

“But I think being an affiliate has been advantageous because they don’t allow any other mortgage shops to come in and attend sales meetings. The company promoting the affiliated relationship has enabled us to capture more business. Obviously, if we hadn’t been an affiliate, we wouldn’t be allowed in those offices.”

McKeough said he relies heavily on RESPRO’s resources for affiliates, as well as on the investors to whom Essential Mortgage sells loans to, to educate himself. Company employees also find useful information from the Louisiana Mortgage Lenders Association to stay current on compliance trends and requirements.

“We don’t have a dedicated compliance department, so I have to use the resources that I have,” he said. “Ironically, just keeping up with all the constant changes is the biggest challenge. I’ve been in the industry a long time, and compliance today is not the compliance of 1991. RESPA and compliance in general has changed so much over the years.

“In the past, RESPA and compliance in general was kind of an afterthought. You had some forms, you had some things integrated into your process, and that was it. Now, things are constantly changing. Now, compliance and RESPA is more of a daily item. It’s in your forefront every single day. You have to prioritize compliance and RESPA. If not, you’re not going be successful at it.”

McKeough added that a lot of RESPA has become more complicated than it needs to be, but the rules still need to be followed.

“You need to be constantly reading about it and educating yourself,” he said. “In the past, compliance was the responsibility of the compliance people. Now, compliance is everybody’s responsibility. I’ve never been a ‘compliance manager’ but I’ve been tasked with being the compliance expert in the area that I oversee. You’ve got to take ownership of the entire process.”

At first, the pandemic proved challenging for the company, as it was forced to suddenly move toward a totally remote work environment.

“We had to implement some paperless tools that weren’t at our disposal before,” he said. “In a way, it actually helped us get rid of some old habits. We had to take on new things and implement new tools in order to operate remotely. It helped us grow a little bit quicker in certain areas where we were doing things the ‘old way’ – some of us were forced to do things in new ways simply by being displaced and having to work remotely.

“We were forced to get rid of the paper and implement some paperless tools, and those are things I wanted to do in the long run anyway, we were just forced to do them a little bit sooner. And it’s funny how quickly we adapted and overcame the challenges. In fact, April of 2020 was actually our best production month in the history of the company. We had a lot of refinances with the low interest rates and timing had a lot to do with it, but still in the face of the pandemic and everyone working remotely and taking on new challenges, we were able to have our best production month in our history.”

But whether a company operates remotely or not, McKeough stressed that compliance has to be a daily effort.

“It can’t be something you think about once a week or once a month,” he said. “It’s got to be something you’re focused on every single day.”