Do Lenders Re­ally Need to Co-Mar­ket With Real Es­tate Agents?

National Mortgage News - - Compliance & Regulation - By bon­nie sin­nock

co-mar­ket­ing ar­range­ments be­tween mort­gage com­pa­nies and real es­tate bro­ker­ages have long been a sta­ple of the hous­ing in­dus­try. But mount­ing com­pli­ance risks and an evolv­ing land­scape for how con­sumers shop for homes and loans to pay for them has some lenders re-ex­am­in­ing their re­la­tion­ships.

Co-mar­ket­ing has had com­pli­ance sen­si­tiv­i­ties since the Real Es­tate Set­tle­ment Pro­ce­dures Act took ef­fect in 1974. Re­cently, those con­cerns have been mag­ni­fied by grow­ing scru­tiny by the Con­sumer Fi­nan­cial Pro­tec­tion Bu­reau.

For ex­am­ple, the CFPB has “re­quested ad­di­tional in­for­ma­tion and doc­u­ments” as part of a two-yearold re­view of Zil­low’s co-mar­ket­ing pro­gram, Chief Fi­nan­cial Of­fi­cer Kath­leen Philips said last month dur­ing the com­pany’s first-quar­ter earn­ings call. Zil­low be­lieves its co-mar­ket­ing pro­gram is com­pli­ant for all par­ties in­volved in it, she said.

The bu­reau also re­cently al­leged that Prospect Mort­gage vi­o­lated RESPA by, among other things, us­ing a third-party web­site’s ads to pay for re­fer­rals. Prospect re­cently paid a $3.5 mil­lion fine re­lated to var­i­ous kick­back al­le­ga­tions.

At the same time, the CFPB has been quite crit­i­cal of mar­ket­ing ser­vices agree­ments, which the agency claims are of­ten used to dis­guise kick­backs.

Those risks have some lenders com­pletely back­ing away from co-mar­ket­ing ar­range­ments.

“Our com­pany does al­most no co-mar­ket­ing with Real­tors, and the rea­son for it is our com­pany has taken a very strong com­pli­ance stance,” said Dar­ryl Craw­ford, a re­gional man­ager at Sente Mort­gage in Austin, Texas.

A lo­cal, es­tab­lished lender like Sente might be able to mar­ket to the pur­chase mar­ket suf­fi­ciently with a web­site of its own and tra­di­tional forms of co- mar­ket­ing with Real­tors like home­buyer sem­i­nars, he said.

Co-mar­ket­ing might be more es­sen­tial to other lenders, though.

“I would tell you that the newer the mort­gage banker, or the newer the mort­gage com­pany, the more im­por­tant their on­line pres­ence is,” said Craw­ford.

With con­sumers in­creas­ingly start­ing their home and mort­gage shop­ping on­line, some lenders may also find they can suf­fi­ciently achieve their on­line ad­ver­tis­ing goals on their own. Zil­low, for ex­am­ple, of­fers both a co-mar­ket­ing ad­ver­tis­ing plat­form and a stand­alone prod­uct where lenders can ad­ver­tise their rates.

RESPA pro­hibits lenders and real es­tate firms from pay­ing or re­ceiv­ing fees, kick­backs or any other “thing of value” in ex­change for re­fer­ral busi­ness. In the con­text of joint ad­ver­tis­ing, each side must pay their fair share. Divvy­ing up those costs was some­what eas­ier in the past, when print ad­ver­tis­ing was the pri­mary method of reach­ing con­sumers.

While dig­i­tal ad­ver­tis­ing tools like Zil­low’s and other co-mar­ket­ing plat­forms are bet­ter at en­gag­ing con­sumers and track­ing re­sults, they also cre­ate new chal­lenges for dis­tribut­ing costs eq­ui­tably.

As in tra­di­tional print ads, on­line co-mar­ket­ing has a bet­ter chance of pass­ing com­pli­ance tests if the pre­sen­ta­tion of the two par­ties in­volved and the split in costs are eq­ui­table, mak­ing it less likely to be seen as a paid re­fer­ral.

In ad­di­tion, the in­ter­ac­tive na­ture of a click-through on a web­site has added an­other di­men­sion to on­line co-mar­ket­ing com­pli­ance re­views, said Richard Horn, a former CFPB at­tor­ney who is now in pri­vate prac­tice.

Com­pli­ance “re­ally de­pends on how [the web­site’s] set up, in ad­di­tion to the lan­guage used in the ad­ver­tise­ments,” said Horn, who has not worked on ei­ther the Zil­low in­ves­ti­ga­tion or the Prospect con­sent or­der.

De­spite the com­pli­ance risk, mar­ket­ing on Zil­low is some­thing large or grow­ing lenders may find it tough to com­pete with­out, said Garth Gra­ham, a se­nior part­ner at mort­gage in­dus­try con­sul­tancy Strat­mor Group.

“Zil­low is sig­nif­i­cant as a per­cent of the over­all search traf­fic re­lated to real es­tate es­pe­cially in a pur­chase mar­ket,” he said. “Over 50% of all real es­tate searches are done on Zil­low, so lenders need to have a strat­egy around how to have a pres­ence on Zil­low.”

How­ever, paid co-mar­ket­ing isn’t the only way for lenders to do that.

“We do have a so­lu­tion for lenders to pub­li­cize tes­ti­mo­ni­als. That will help drive a pres­ence on Zil­low as well as drive traf­fic to their sites, and that is not get­ting into the lead busi­ness or joint mar­ket­ing busi­ness,” said Gra­ham. “One of the things that we rec­om­mend for clients is that they ac­tively pur­sue get­ting tes­ti­mo­ni­als from sat­is­fied con­sumers on Zil­low.”

But co-mar­ket­ing with a real es­tate agent can add more value, he added.

While bor­row­ers iden­tify loan of­fi­cers as the pri­mary re­fer­ral for their home loans 30% of the time, real es­tate agents rep­re­sent an­other 30% of all re­fer­rals in pur­chase trans­ac­tions; and third-party or in-house ex­perts can help with com­pli­ance. That be­ing said, dif­fer­ent reg­u­la­tors have had dif­fer­ent takes on in­dus­try rules like RESPA and that can make what passes muster tough to an­tic­i­pate.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.