Partnering with Mortgage Referral Sources

“Substance over Form” and not “Form over Substance.”

In the last 18 months there has been an increased interest in the mortgage industry in partnering with real estate agents, insurance agents, and other potential referral sources.  However, there is a lot of misinformation circulating, and some of the referral source arrangements we have been hearing about recently clearly involve RESPA, which prohibits the payment or receipt of “anything of value” in exchange for the referral of settlement services.

There are several legitimate exceptions to RESPA’s anti-kickback rule that allow the referral source to receive some compensation.  They are, however, a bit counter-intuitive and sometimes antithetical to what one would assume are customary business practices.  The bottom line is that the money that changes hands cannot be correlated to the number of referrals made.  Therefore, proceeding with caution in this area is recommended.

Careful review with competent legal counsel prior to partnering with potential referral sources is necessary. Shumaker Williams has been involved in RESPA compliance matters for over 25 years assisting service providers in avoiding violations while maintaining a robust referral network. As is often the case, the “devil’s in the details” and how the arrangement actually operates matters most. This is one area of consumer finance regulation where “substance over form” and not “form over substance” governs.

We are happy to discuss your plans and ideas for partnering with referral sources and can assist you through the entire process.

Steve Lovejoy will be attending the Mid-Atlantic Regional Conference at MGM National Harbor.  Be sure to stop by and visit him in the Exhibit Hall on Tuesday, May 9, 2023.

The information contained herein is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information contained in this blog should be construed as legal advice from Shumaker Williams P.C. or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. This blog is current as of the date of original publication.