section 8(c) goes on to list examples of permissible payments and these examples emphasize that such payments must be reasonable and for actual services rendered. the cfpb found that msa participants often failed to provide the services called for under those agreements and that those parties paying for the services acquiesced in such behavior. the cfpb concluded that “when services promised under an msa are not performed, but payments are being made, a reasonable inference can be drawn that the msa is part of an agreement to refer settlement service business in exchange for kickbacks.” building on that inference, the agency went on to advise that msas pose “risks that are greater and less capable of being controlled” by parties to such agreements and that monitoring vendor compliance with msa mandated services is “inherently difficult,” even when the msa contract had been “carefully drafted to be technically compliant with .
second, the services called for under the msa must be actually performed. fourth, the payments under the msa may not be for duplicative services, e.g., paying for services already performed or to be performed by the paying party or others on its behalf. the cfpb faqs reiterate that disguising kickbacks as msa payments is illegal under respa, and the agency remains committed “to vigorous enforcement of respa section 8.” however, by vacating the inference or presumption of msa illegality, combined with a general perception that cfpb has not prioritized respa section 8 enforcement, many will likely construe these october 2020 developments as a weakening of section 8 cfpb enforcement resolve. a charge of administration in washington may also lead to more aggressive enforcement.
msas, under cordray’s tenure, were considered by many to be a precarious business given his 2015 compliance bulletin warning against their “substantial risks” and his novel respa interpretations that ignored the statute and longstanding hud guidelines. cordray’s exit, coupled with the phh court’s rejection of his view that any arrangement anticipating future referrals is suspect under respa, removed a significant disincentive towards their use. while one black cloud of regulatory uncertainty has been removed, it’s still important to remember the remaining legal pitfalls associated with msas and to mind, the traditional do’s and don’ts. the era of “regulation by enforcement” and rogue respa interpretations may be over at the federal level, but the cfpb will pursue core respa violations under traditional enforcement theories. it’s still possible that aggressive state regulators could adopt cordray’s respa theories when pursuing alleged violations and that their arguments could persuade courts outside of the d.c. circuit.
because of these continued legal risks associated with msas, it’s advisable to keep in mind the following do’s and don’ts when structuring and operating an msa. it will be interesting to see if the cfpb under mulvaney or his successor revises its 2015 msa compliance bulletin (which conflicts with the court’s opinion in phh) or engages in a respa rulemaking to provide more precise guidance to companies that operate msas. in the meantime, attention to longstanding respa requirements and applicable state laws is warranted. minerick’s alternative software first approach to selling homes has resulted in him being named the no. 9 by sales volume in the 2022 realtrends + tom ferry the thousand rankings.
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