Joint Advertising with Lenders - What you can and cannot do
Marianne McCarty
Broadview Mortgage
Hardly a week goes by without an inquiry from a real estate agent, asking us to pay for advertising. Joint advertising is allowed, but with certain guidelines under the Real Estate Settlement Procedures Act (RESPA).
Asking a mortgage lender to pay the entire cost of a real estate agent’s advertising is prohibited under the law. The lender can, however, share the cost on a proportionate basis. In other words, if the lender shares 25% of the ad space, the lender may pay 25% of the ad cost. Paying any more than the pro-rata share is considered “accepting a thing of value” in the referral of business and violates the law under the anti-kickback provision.
Giving a real estate agent promotional items (such as pens, coffee cups and note pads) with the loan officer’s name on them is allowed, however, offsetting a real estate agent’s marketing expenses, by providing promotional items with the real estate agent’s name on them, is also considered a violation of RESPA.
Over 900 of these cases were investigated in 2003. HUD has tripled it’s RESPA enforcement staff and more attention is being paid to these type of violations. The penalty for violations of RESPA’s anti-kickback provision can be up to $10,000 or imprisonment of up to one year.
Receiving anything of value, whether it be monetary or not, for the referral of business to a real estate company’s in-house lender is another serious violation of RESPA. Because real estate agents are independent contractors, and not actually employees, they may not be given any special perks to encourage use of the in-house lender.
More information can be obtained on HUD’s RESPA website.
Marianne McCarty is the Executive Vice President for Broadview Mortgage Company and past president of both the Columbus and Ohio Mortgage Bankers Associations. She serves on the Board of Directors, Board of Governors and the RESPA At Large Group for the Mortgage Banker’s national association.
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