Another title insurance company has become ensnared in the Consumer Financial Protection Bureau's (CFPB) regulatory dragnet.
Michigan-based Lighthouse Title has been fined $200,000 by the bureau for illegal quid pro quo referral agreements. According to a bureau press release, the company entered into marketing services agreements (MSAs) with various companies, including, for example, real estate brokers, with the understanding that the companies would refer mortgage closings and title insurance business to Lighthouse. The agreements made it appear as if the payments would be based on marketing services the companies were supposed to provide to Lighthouse.
However, Lighthouse actually set the fees it would pay under the MSAs, in part, by considering the number of referrals it received or expected to receive from each company, the bureau says in its release. An investigation found that the companies that had MSAs on average referred significantly more business to Lighthouse than those that did not.
Such arrangements are a violation of the Real Estate Settlement Procedures Act (RESPA), which prohibits, among other things, providing something of value to any person with an agreement or understanding that the person will refer real estate settlement services.
‘Today's action sends a clear and simple message, that quid pro quo agreements for real estate referrals are illegal,’ says Richard Cordray, director of the CFPB, in the release. ‘The consumer bureau will continue to take action to ensure that the mortgage market is a level playing field where everyone plays by the rules.’
In addition to the fine, Lighthouse must terminate any existing MSAs with companies in a position to refer business to Lighthouse, and is prohibited from entering into new MSAs with any such companies.
