Ban on Co-Marketing – CFPB’s latest RESPA advertising rules change everything real estate professionals need to know about co-marketing deals.
The Bureau removed its previous 5-year compliance bulletin on marketing agreements, replacing it with 14 specific FAQs. These FAQs spell out exactly what payment structures work and what activities Section 8 of RESPA prohibits.
Real estate professionals and lenders get more flexibility with joint marketing under the new rules. The guidelines let you create marketing agreements while keeping strict rules against kickbacks and referral fees.
This checklist shows you what RESPA requires now, making sure your co-marketing deals stay legal and effective.
CFPB’s New RESPA Advertising Guidelines
CFPB proposed major RESPA advertising guideline changes on July 10, 2024. These rules target co-marketing deals between mortgage lenders, real estate agents, and settlement service providers.
Ban on Co-Marketing: Key Changes from Old Rules
CFPB’s 2024 RESPA rules mark a big shift in advertising requirements. The Bureau dropped its strict 2015 MSA Compliance Bulletin back in October 2020, switching to simpler FAQ guidelines that work better for the industry. The latest rules set clearer limits on what you can and can’t do.
The rules now look at each situation’s specific facts to check RESPA compliance. You’ll find real examples showing what works for MSAs, gifts, and promotions – something the old rules never explained.
What Real Estate Professionals Must Know
Four main rules matter for your business:
- Fair Market Value: Your payments must match actual service value, not referral potential
- Documentation: You need solid proof showing marketing payments aren’t hidden referral fees
- Digital Marketing: Special rules apply to online leads and comparison platforms
- Co-Marketing Limits: Clear lines between allowed marketing and banned referrals
CFPB says showing information unfairly on digital platforms counts as steering – that breaks RESPA rules if money changes hands.
When These Rules Take Effect
You can comment on these rules until September 9, 2024. The rules should start about 12 months after they’re published, around mid-2025.
CFPB means business with these rules. Last August, they fined a mortgage lender and real estate brokerage almost $2 million for breaking RESPA rules on promotional events and MSAs.
RESPA Rules for Legal Co-Marketing Deals
RESPA’s new advertising rules set clear standards for co-marketing and MSAs. Legal deals need three key elements that show real business relationships between settlement service providers.
Ban on Co-Marketing: Fair Market Value Rules You Must Follow
Your co-marketing payments must match “the value of services actually performed”. This rule separates real marketing from hidden referral deals.
Payment calculations can’t factor in possible referrals. Each provider pays based on their share of the ad space. A 50-50 split works when both parties get equal space. Remember – payments can’t depend on closed deals or transactions.
Documentation That Keeps You Safe
Strong paperwork protects you from RESPA problems. Start with written agreements showing exactly what marketing services each party handles.
Create rate sheets that prove fair market value for your area’s marketing costs. Keep every invoice and receipt from marketing expenses. Digital marketing needs clear metrics explaining your cost-sharing math. Tell consumers about any co-marketing partnerships.
Red Flags That Break RESPA Rules
CFPB watches for specific violations. Paying based on referral numbers breaks Section 8(a). Splitting fees without real services breaks Section 8(b). Stay away from these banned practices:
- Taking gifts or items tied to referrals, even small ones like coffee
- Making clients use certain vendors or exclusive deals
- Hidden compensation in endorsements
- Disguised kickback payments
Your co-marketing must work exactly like your written agreement says.
Real Estate Marketing Agreements Under New RESPA Rules
Real estate professionals need new MSAs that match RESPA’s latest advertising rules. Your current co-marketing deals must meet these updated standards.
Ban on Co-Marketing: Steps to Review Your Agreements
Pull together your marketing agreements, backup materials, and co-marketing communications. Check each agreement against these rules:
- Marketing vs. Referrals: Your MSA must focus on broad marketing services, not individual referrals.
- Service Documentation: List every service clearly, with exact details about timing and who does what.
- Compensation Structure: Base payments on fair market value – time spent, work difficulty, audience reach. Never tie them to referrals.
- Non-Exclusivity Clause: Make sure you can offer similar services to competitors.
- Consumer Disclosure: Add rules about telling consumers your role in third-party promotions.
Look for any payments that seem too high or lack documentation. These issues need fixing right away.
Contract Language That Works
Your MSA needs specific wording. Put these key sections in your updated contracts:
- Scope of Services: “Provider agrees to perform the following specific marketing services: [detailed list with measurable deliverables].“
- Fair Value Determination: “Compensation is based solely on [specific metrics] and represents fair market value for services performed.“
- Non-Referral Clause: “No portion of payment shall be construed as compensation for referrals or recommendations of clients.“
- Service Verification: “All marketing activities shall be documented through [specific reporting requirements].“
- Termination Rights: “Either party may terminate this agreement with [timeline] notice.“
Your updated agreements must show how you’ll check compliance regularly.
Technology Tools for RESPA-Compliant Co-Marketing
Digital tools make RESPA compliance easier for real estate professionals. These platforms handle the complex rules while keeping your co-marketing deals safe.
Ban on Co-Marketing: Cost-Sharing Tools That Work
Smart co-marketing platforms do the math for you. They split advertising costs based on exact measurements, making sure each party pays the right amount.
The tools match payment amounts to ad space – exactly what CFPB wants to see. Settlement service providers get clear payment records that show real market value, not referral deals. Every payment gets checked against the actual promotion space before approval.
Documentation Systems That Protect You
Good records keep you safe during CFPB audits. Modern compliance systems create perfect documentation trails for your mortgage deals. These tools give you:
- Ready-made documents with built-in compliance checks
- XML files that work for audits
- Reports proving RESPA compliance
Your records stay safe in digital vaults approved by Fannie Mae and Freddie Mac.
Smart Systems That Catch Problems Early
New software spots RESPA problems before they happen. Smart programs check your co-marketing deals for risky language or payment setups. These tools handle the boring compliance work while you focus on selling homes.
The software watches your mortgage process constantly, finding any signs of steering or other banned practices. It also checks your digital platforms to make sure they show information fairly – a key CFPB requirement for online marketing.
RESPA Rules for Commercial Deals: CFPB’s Latest Word
CFPB explains exactly when RESPA applies beyond home sales. These boundaries matter for your advertising and co-marketing compliance.
Commercial vs. Residential Rules
RESPA skips over “extensions of credit primarily for business, commercial, or agricultural purposes.” This rule shows up all through CFPB’s guidance.
Regulation X lets you use Regulation Z rules to figure out what counts. The loan’s main purpose matters more than property type. Settlement service providers must write down how borrowers plan to use their money – this decides whether RESPA rules apply.
Ban on Co-Marketing: Mixed-Use Property Rules
Properties with both homes and businesses need special attention. RESPA kicks in when you see “a one-to-four family structure” as Regulation X defines it.
Courts say RESPA disclosure rules might apply to residential parts of mostly commercial buildings – but only for one-to-four unit transfers. Mixed-use deals need extra paperwork showing property details and loan purposes.
State Rules That Matter
RESPA sets federal rules, but state laws add more requirements. Federal rules push aside state laws that clash with RESPA.
Still, you must follow state settlement rules unless they directly conflict with RESPA. Settlement service providers need different compliance plans for different states. Real estate professionals working across states face extra work making co-marketing deals that satisfy both RESPA and local advertising rules.
What These RESPA Changes Mean for Your Business
CFPB’s new rules change everything about co-marketing partnerships. Fair market value, solid documentation, and clear payment tracking form the foundation of good compliance. Modern tech tools handle RESPA requirements through smart tracking and early problem detection.
Real estate professionals need more than basic paperwork. RESPA rules work differently across various deals. Mixed-use properties need extra care. State rules add more steps to compliance.
Three things make co-marketing work under these rules:
- Marketing agreements with complete documentation
- Exact cost-sharing math
- Marketing and referrals are kept separate
Smart professionals use tech tools and follow these rules. Their co-marketing deals last longer and stay compliant.
RESPA rules keep changing. Real estate professionals who master these advertising rules today build stronger marketing partnerships. Good compliance protects your business and creates better relationships with partners.
