As RESPA violations can carry serious consequences, if you have questions or concerns about marketing agreements, we encourage you to seek additional resources and obtain legal advice.

Understanding Marketing Agreements

RESPA does not prevent joint advertising between two settlement service providers, such as a mortgage banker and a real estate broker advertising their services on the same brochure or newspaper ad. However, each advertising party must pay for his share on a proportionate basis.

So if a real estate broker equally shares ad space with a title company, each party must pay 50 percent of the ad cost. Paying more than the pro-rata share can be considered by the Department of Housing and Urban Development (HUD) as "accepting a thing of value" for the referral of business, which is a violation of RESPA's Section 8 anti-kickback provision.

Exceptions to Section 8 Anti-kickback Provision

RESPA does provide an exception to Section 8 relating to payments for marketing and advertising. Section 3500.14(g)(vi) of the rules states:

"[N]ormal promotional and educational activities that are not conditioned on the referral of business and that do not involve the defraying of expenses that otherwise would be incurred by persons in a position to refer settlement services or business incident thereto."

Under this exemption, for example, a title company can provide a real estate agent with note pads and pens with the title company's name as long as it is a normal promotional item.

However, it is a RESPA violation if the tile company provides a real estate agent with note pads and pens with the real estate agent's name on the products for marketing realty services to clients.

This is because the promotional items with the agent's name on them can be considered a thing of value for the referral of business as it offsets the agent's marketing expenses.

What Marketing Agreements Cover

Marketing agreements can cover things like:

• promoting loan or title products through real estate brokers' publications
• placing the lender or title agent's banner on the brokerage's Web site
• displaying the lender or title agent's sign in the real estate office and at open houses
• handing out brochures
• providing a list of individuals who have visited open houses or signed listing agreements or sales contracts
• permitting limited use of the brokerage's logo to identify the company as the preferred vendor
• permitting the lender or title agent to make presentations to the real estate sales staff
• providing office space and facilities

A Final Point

Don't try to structure a marketing agreement on your own. In some states, only licensed mortgage brokers may be paid for taking loan applications, and in others, real estate brokers may be prohibited from receiving dual compensation in the same transaction. Proceed with the guidance of an attorney familiar with RESPA.

For more information:

The Law & You: RESPA-permitted fees