CFPB investigating Zillow for possible RESPA violations

Members of the mortgage industry may want to take a closer look at their co-marketing arrangements.

According to a blog post by Ballard Spahr attorney Richard Adreano, the CFPB has been reviewing Zillow’s program for compliance with the Real Estate Settlement Procedures Act (RESPA).

Under RESPA, lenders, mortgage brokers, or servicers of home loans must provide borrowers with certain disclosures regarding the nature and costs of the real estate settlement process. RESPA also prohibits specific practices, such as kickbacks for referrals of settlement business.

According to Adreano, members of the mortgage industry have long wondered if allowing their real estate agents or loan officers to engage in co-marketing on Zillow Group applications and websites posed a risk to their companies under RESPA.

From the blog:

The industry may soon know the answer, as Zillow Group advised in recent prepared remarks on first quarter earnings that “Over the past two years, the Consumer Financial Protection Bureau, or CFPB, has been reviewing our program for compliance with the Real Estate Settlement Procedures Act, or RESPA, which is a regulation designed to protect consumers.”

Those remarks, dated May 4, 2017, are available here.

The blog post notes that while the Zillow announcement indicates that the CFPB investigation has occurred over the past two years, the apparent reason for the announcement is the disclosure that “Recently, the CFPB requested additional information and documents from us as part of their evaluation, which we are working with them on.”

Zillow also notes that it considers its co-marketing program to be compliant, and that it has continually encouraged consumers to shop around while looking for a mortgage.

Housing Wire reported the following statement obtained from Zillow’s latest earnings report:

In April 2017, we received a Civil Investigative Demand from the Consumer Financial Protection Bureau (“CFPB”) requesting information related to our March 2017 response to the CFPB’s February 2017 Notice and Opportunity to Respond and Advise (“NORA”) letter. The NORA letter notified us that the CFPB’s Office of Enforcement is considering whether to recommend that the CFPB take legal action against us, alleging that we violated Section 8 of the Real Estate Settlement Procedures Act (“RESPA”) and Section 1036 of the Consumer Financial Protection Act.

Zillow maintains that they believe they fully comply with RESPA:

We believe our response to the NORA letter addresses the CFPB’s concerns related to our co-marketing program under which a lender pays us to appear in advertising alongside a real estate agent. We are continuing to cooperate with the CFPB in connection with their most recent request for information. We continue to believe that our acts and practices are lawful and that our co-marketing program allows lenders and agents to comply with RESPA.

Tags: CFPB, Mortgages, RESPA

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