Did I Just See a RESPA Violation?

Recently, while photo copying HUD1 Settlement Statements at a real estate office, and for all eyes to see (my eyes were not wandering!), there on the wall was taped an advertisement, a glossy pitch from a mortgage lender soliciting the real estate agents. I have summarized below:

Individual Goal

Refer 4 loan applicants from August 1 through November 1 and get a $200 gift certificate for personal marketing

Office Goal

Just one referral gets you invited to a group dinner:

Refer 9 loan applicants – dinner at the “not so exciting” restaurant

Refer 18 loan applicants – dinner at the “okay this is getting better” restaurant

Refer 27 applicants – dinner at the “yes, I have arrived, fancy “schmancy” steak house

Does this advertisement violate Section 8 or any other section of RESPA? I would appreciate your opinion, maybe I am missing something.

Every day the independent title insurance agent struggles to compete with others who are not playing fairly and with the controlled businesses.

At this time, I have to direct you to Ethical Practices in Real Estate. Douglas R. Miller’s superb writing and on-the-mark insight into CBA’s, kickbacks, and ethics in the real estate industry is phenomenal. An absolute must read!

Credit Bureaus are Part of the Problem

We have long heard this complaint from our customers:  “the minute that I made application with XYZ, I started receiving telephone calls from many different lenders, at all times of the day and night.  How do they know we are refinancing?”

Well, thank you to the Washington Post for solving the mystery.   It seems that the credit bureaus are selling “trigger” lists to third parties NOT involved in the transaction.  When a credit bureau gets a request from a lender, it triggers a report to outside parties interested in a transaction.

Though this is not a title problem, it is part of the general morass that the entire industry finds itself.  Trigger lists aren’t for reputable players, they are for the predators.  The concept of targeting people who have just started the lending process and trying to steal the deal from a competitor is just business one might say.    But when the originating mortgage lender is paying for an inquiry and credit report and then the credit bureau turns around and sells the “inquiry” to the paying lender’s competitor – that is distasteful.

The ability to further screen the data by geography and credit score is even more troubling.  The buyers of trigger lists are predators, and wolves don’t go for the strongest members of the herd, they go for the weakest.  The trigger lists arm them with all the information they need to find their next victims: doubly distasteful.

The Washington Post reports that trigger lists are an industry norm and the FTC is not inclined to stop the practice.

While the powers that be muddle through the mess, there is something you can do.  Opt out. Here’s the link.  Tell your clients to do the same.

Francine contributed to writing this article.

Disruption on the Technology Side

IBM has announced that they are entering the market for mortgage processing automation.  Having worked for large system integrators in the past, it tells me several things:

1. IBM has determined that there is a sizeable and mature market to support their entry
2. They feel current vendors are under serving the market
3. They have analyzed the market and decided that it has consolidated or will consolidate into enough large players to support IBM’s sales and marketing model

If IBM is successful and stays in the market it stands to reason they will eventually expand horizontally into all aspects of the RE process, from listings to closings. 

This a traditional disruption of the market, where a large entrant displaces a number of smaller or less efficient competitors.   The title companies have placed considerable emphasis on the automation market for their continued profitability.  This should definitely give them cause for alarm.

We all own the fraud

Today, the Washington Post reported the vast increase in mortgage fraud.  This isn’t news to anyone who follows the new wires, but it will be news to main street.  According to the FBI:

“Fraud for profit is committed mostly by industry insiders….”

The nature of real estate transactions makes it very difficult to perpetuate fraud by oneself.   Either willing or unwitting accomplices are required.   Real Estate Agents, appraisers and title agents have to cooperate for many of these frauds to occur.  Once upon a time the industry didn’t let bad actors in the door.  Now we just look the other way – its someone else’s problem. 

“The only thing necessary for the triumph of evil is for good men to do nothing. “  – Edmund Burke

With each fraud the reputation of our industries is tarnished.  Its time for all of us to do something.