Marx Sterbcow of the Sterbcow Law Group will present at the Escrow Institute of California’s 70th Anniversary Conference  at the Hyatt Regency Indian Wells Resort & Spa in Palm Springs, California on May 5, 2017.  The Escrow Institute of California “EIC” Annual Conference is May 4-6, 2017.

The session “Understanding CFPB Enforcement under Unfair Deceptive or Abusive Acts or Practices (UDAAP)” is from 10:15 – 11:45 AM.  Mr. Sterbcow is co-presenting with Matthew Davis with the Davis & Davis Law Group.

Marx Sterbcow, Managing Attorney, of the Sterbcow Law Group will present in two sessions at the 2017 Real Estate Service Providers Council “RESPRO” Annual Conference at the Bellagio Hotel in Las Vegas, Nevada on April 19, 2017.  The RESPRO Conference is from April 18-20, 2017.

The first session “Unfair Deceptive Abusive Acts Practices UDAAP: The Cloud Still Hangs Low” is from 1:30 PM– 2:30 PM in the DaVinci 3 Ballroom. Mr. Sterbcow is co-presenting with Francis (Trip) Riley with Saul Ewing. The presentation will focus on how UDAPP will continue to effect CFPB’s actions on settlement service providers and how RESPA regulated Affiliated Business Arrangements (AfBAs) need to be cognizant of their marketing and advertising efforts. We will address cases of interest and suggest tips that every company should incorporate.

The second session “RESPA: Stretching the Envelope on Prohibited Referrals” is from 2:45 PM – 3:45 PM in the DaVinci 3 Ballroom.  Mr. Sterbcow is co-presenting with Stan Gordon with Gordon & Associates and Francis (Trip) Riley with Saul Ewing.  The presentation will focus on the basic parameters of what is prohibited referral activity have expanded under CFPB which has resulted in a chilling effect on the financial settlement service industry.  The ambiguity in RESPA on defining a referral and the perceived risks in marketing activities in various circumstances will be discussed.  The presentation will provide some clarifications on when an endorsement of a service provider becomes a prohibited referral.  The session will also address whether it is a violation of Section 8 for a nationwide real estate brokerage group to promote a service provider throughout its owned or affiliated companies to their management and sales agents.  How considerations under PHH and RESPA exception Section 8(c)(2) need to be considered and is the exception absolute as implied by the current ruling.

The Legal Description and Dodd Frank Update have teamed up again to provide their 5th annual Regulatory Outlook Webinar on Wednesday, January 18, 2017 (2:00 – 3:30 P.M. EST) educating mortgage, title and settlement services professionals on the compliance trends and issues to expect in the New Year.  The yearly webinar series has quickly become one of the most important educational sessions each year to find out what in store for the State of the Settlement Service Industry in the coming year.

This webinar features instructors Francis “Trip” Riley of Saul Ewing, Loretta Salzano of Franzén and Salzano, and Marx Sterbcow of the Sterbcow Law Group. These nationally-recognized attorneys will join moderator Danielle Kaiser of NATIC in a discussion of the pressing political, regulatory and compliance issues to watch in 2017 and how to prepare your business.

Instruction will include:

Marx Sterbcow of the Sterbcow Law Group will speak on “The Essentials IV — CFPB Consent Orders for Compliance Officers” at the Mortgage Bankers Association Regulatory Compliance Conference at the Grand Hyatt Hotel in Washington, D.C. on Sunday, September 18, 2016 from 3:30 PM to 4:45 PM. The session will be a comprehensive overview of key Consumer Financial Protection Bureau consent orders and it will provide tips on how to apply the findings to your mortgage business.

For more information about the MBA Regulatory Compliance Conference please click here.

On April 21, 2016 the Consumer Financial Protection Bureau (CFPB) filed suit against two owners of a company who resold loan applications containing sensitive personal data to lenders and data brokers without assessing the sources of those leads or purchasers they sold the lead data too. The CFPB filed suit against the owners of D and B Marketing, Inc. d/b/a T3Leads, Dmitry Fomichev and Davit Gasparyn. T3Leads is a lead aggregation company based in Burbank, California that purchased and sold payday and installment loan applications without properly vetting buyers and sellers.

T3Leads and two other parties were previously sued by the CFPB in December of 2015 in a separate lawsuit but this suit targets the individual co-founders of T3Leads.

CFPB Richard Cordray stated that “T3Leads steered consumers towards bad deals with lenders it didn’t vet and with no regard for how consumer’s information would be used. This is a reminder to the middlemen who buy and sell consumer loan applications: if you engage in this type of conduct, you risk the consequences of harming people.”

Lead aggregators buy consumer information (also called Leads) from Lead Generators, which are websites that market payday and installment loans. These Leads often contain personal information such as a consumer’s name, telephone number, home and email addresses, references, and employer information.

The CFPB claims jurisdiction over T3Leads and the two co-founders for violating Unfair, Deceptive, or Abusive Acts or Practices [UDAAP].

In these lawsuits the CFPB alleges that T3Leads did not vet or monitor its lead buyers, exploited consumer’s lack of understanding of the risks, costs, and conditions of the loans being applied for, and put consumer information at risk of being trafficked for illegal purposes. T3Leads purportedly sold consumer information to Indian Tribes and lenders based in foreign countries who according to the CFPB “often skirt state laws or deny the jurisdiction of U.S. courts.”

Of particular importance is the CFPB’s seemingly new tool it is using for UDAAP enforcement called “Reverse Vendor Management Oversight“. T3Leads is accused of failing to vet or monitor its upstream lead generator vendors whom it was purchasing its leads from. The monitoring of upstream vendors is a concept that could have particularly ground shaking effects on every industry the CFPB regulates including the entire residential lending industry.

The Bureau alleged that T3Leads:

“Ignored false or misleading statements about lenders obtaining consumer applications: Consumers who applied for loans through T3Leads’ lead generators had no control over who received their application and had to trust T3Leads’ selection of lenders in its network. But those lead generators suggested that its lenders met certain standards, and often falsely claimed to match consumers with lenders that “follow the rules” or offer “reasonable” terms.”

Failed to vet or monitor purchasers: T3Leads failed to vet purchasers before adding them to its network or selling them leads, and did not require lenders to provide information about whether they complied with state laws.

Steered consumers toward unfavorable loans: T3Leads’ process often steered consumers to lenders offering less favorable loan terms than otherwise available. In particular, consumers were likely to be connected to lenders that ignore state usury limits or claim immunity from state regulation and jurisdiction. These entities often charge higher interest rates than lenders that do comply with state laws, and they often paid the highest prices for leads from T3Leads.”
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Marx Sterbcow, the Managing Attorney, of the Sterbcow Law Group, and Charles Cain, Vice President, Agency, WFG National Title Insurance Co. will present at the 2016 National Settlement Services Summit [NS3] at the Le Meridien & Sheraton Hotel in Charlotte, North Carolina on Wednesday, June 8, 2016.

The session titled “Ethics: UDAAP, Reverse Vendor Oversight and Legal Malpractice” will discuss how Title agents and attorneys are expected to adhere to the highest ethical standards, and how Dodd Frank’s ban on Unfair, Deceptive or Abusive Acts or Practices (UDAAP) have given the CFPB broad authority to root out questionable activities. Learn how UDAAP is requiring agents to gear up when it comes to ethical conduct, particularly in the area of RESPA compliance. The presentation will explain how UDAAP could make vendor management liability and oversight a two-way street through a new enforcement tactic known as “Reverse Vendor Management Oversight”. Reverse Vendor Management Oversight could challenge the bounds of legal malpractice by requiring title agents, lawyers, and attorney notaries to be on the lookout for vendor compliance issues with their clients. Speakers will share real-world examples, and attendees will walk away with actionable tips for remaining UDAAP compliant in an increasingly active RESPA and UDAAP enforcement environment.

October Research Corporation has generously offered a Discount Code to attend NS3 for all friends and clients of the Sterbcow Law Group. To receive your Discount Code please contact the Sterbcow Law Group and we will send you the special discounted rate code to attend NS3.

Marx Sterbcow, Managing Attorney, of the Sterbcow Law Group will present in two sessions at the 2016 Real Estate Service Providers Council [RESPRO] Annual Conference on Tuesday, April 19, 2016 at the Ritz Carlton Hotel in New Orleans.

The first session ” Uncertainties to Website Endorsements and Intra Company Organizational Endorsements” is from 11:00 AM – 12:00 AM in the LaSalle Ballroom. Mr. Sterbcow is co-presenting with Stan Gordon with Gordon & Associates and Francis (Trip) Riley with Saul Ewing. “There are a variety of views as to whether the inclusion of a service provider on a website is a permissible endorsement or a referral in violation of RESPA. Can it be a referral when there is no direct consumer communication? Is the website in the nature of an electronic directory even if it has a link to the service provider? The CFPB’s action have caused uncertainty and an over action in this area. The same uncertainties exist in an integrated group of companies driving an endorsement of a service provider down to its management and sales agents. Today many would say that is a referral.”

The second session “Who’s Your Vendor? Vendor Management for Affiliated Business Title Agencies” is from 4:15 PM – 5:15 PM in the LaSalle Ballroom. Mr. Sterbcow will co-present with Charles Cain. “Notaries, searchers and abstractors, marketing companies, lead generation portals, recording companies, even couriers are sources of liability for you and your lender. How do the real estate broker and agent fit into the issue? Find out what the issues are and how you can respond when your lender customer asks what you do to address fourth-party vendor management liability. During this session, two noted attorneys will discuss real processes in order to provide answers and not just pose more questions. This advanced-level affiliated business arrangement vendor management compliance session is designed to provide specific examples based on our latest experiences across the country.”

A consumer class action RESPA lawsuit was filed on November 25, 2015 by Timothy L. Strader Sr., against PHH Corporation, REALOGY Holdings Corp., PHH Mortgage Corporation, PHH Home Loans LLC, RMR Financial LLC, NE Moves Mortgage LLC, PHH Broker Partner Corporation, REALOGY GROUP LLC, REALOGY Intermediate Holdings, Title Resources Group LLC, West Coast Escrow Company, TRG Services Escrow Inc., NRT LLC, REALOGY Services Group LLC, and REALOGY Services Venture Partner LLC in United States District Court for the Central District of California. (Case No. 8:15-CV-1973).

The allegations in this consumer class action lawsuit largely surround issues involving violations of Section 8(a) and Section 8(c)(4) of the Real Estate Settlement Procedures Act of 1974, as amended, 12 U.S.C. §§ 2601 et seq (“RESPA”), and its implementing regulations, 12 C.F.R. §§ 1024.1 et seq. (“Regulation X”). RESPA – and, in particular, the prohibition on referral fees and kickbacks in 12 U.S.C. § 2607 – was explicitly designed to protect consumers “from unnecessarily high settlement charges caused by certain abusive practices,” such as those described in this Complaint. 12 U.S.C. § 2601(a). As such, 12 U.S.C. § 2607(a) prohibits the giving or accepting of any “fee,” “kickback,” or “thing of value” in exchange for business incident to or part of a “settlement service” (as those terms are defined in RESPA and Regulation X) involving a federally related mortgage loan.

The complaints states the Defendants violated RESPA and distorted the market for title insurance and other settlement services in at least two different manners:

First, PHH and Realogy created an affiliated business arrangement called PHH Home Loans, which the Plaintiffs contend was a sham joint venture carefully engineered to facilitate and disguise the payment of unlawful referral fees and kickbacks in exchange for the referral of title insurance and other settlement services to Realogy’s subsidiary, Title Resource Group (“TRG”). The allegations further state that prior to October 21, 2015, PHH was bound under a Strategic Relationship Agreement to refer all title insurance and settlement services to TRG. The consumers referred by PHH Home Loans paid approximately $1650 to TRG for title insurance and other settlement services. If this allegation is accurate it would violate Section 8(c)(4) under RESPA* which prohibits the “Required Use” of an affiliate if the consumer paid for those services.

Pursuant to the Strategic Relationship Agreement, PHH Home Loans is the exclusively recommended mortgage lender for Realogy’s real estate brokerage network, which is operated by NRT, LLC (which operates such brands as Coldwell Banker, Sotheby’s International Realty, ZipRealty, The Corcoran Group, and Citi Habitats.

The Plaintiffs also state that PHH receives a right of first refusal for the purchase of the mortgage servicing rights for PHH Home Loans originated mortgages, which permit PHH Home Loans to sell the servicing rights to PHH “on terms no less favorable” than those that could be obtained from an independent third party and that PHH owns a disproportionate share of the servicing rights for those mortgages relative to PHH’s overall market share of residential mortgage servicing. The complaints states that the details of this relationship have not been publicly disclosed to consumers.

Second, the Plaintiffs allege that under a related Private Label Solutions (“PLS”) model–in which PHH manages all aspects of the mortgage process for various large banking institutions that PHH directs the PLS Partners to refer title insurance and other settlement services to TRG without disclosing to consumers the existence of PHH’s affiliation with TRG, nor the fact that PHH was required to cause the PLS Partners to refer title insurance and other settlement services to TRG under the terms of the Strategic Relationship Agreement.

The complaint further states that the undisclosed mandatory referral arrangement existed for over 10 years until October 21, 2015, when PHH and Realogy amended the Strategic Relationship Agreement to delete the mandatory referral provision. PHH filed their latest Form 10-Q with the SEC on November 5, 2015 and based on the exhibits it did not include the mandatory referral provision language. The Plaintiffs contend the reason that PHH deleted this provision is due to the Consumer Financial Protection Bureau v. PHH Corporation enforcement action where the CFPB fined PHH $109 million dollars for its relationship with Atrium Reinsurance Corporation, an affiliate of PHH.

This is a RESPA class action case worth monitoring given the allegations, parties involved, and the CFPB’s related case against Atrium now pending in Federal District Court. Judge Fernando M. Olguin is presiding over the case.

If you have any questions about how your company’s affiliated businesses are structured please contact us to set up a consultation.
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Marx Sterbcow, managing attorney with the Sterbcow Law Group, and James Milano, member with Weiner Brodsky Kider PC will speak on RESPA News’s webinar series on the topic of Lead Generation Compliance. The webinar is scheduled for Tuesday, November 10, 2015 from 2:20-3:15 PM EST. The Editor of RESPA News, Justine Jones will moderate the webinar.

We will train participants on the regulations governing the real estate lead generation industry and what increased attention the CFPB, Federal Trade Commission, and other agencies mean for your business practices. The webinar will focus on how the CFPB expanded its authority with the use of UDAAP, the potential ramifications of Regulation Z’s Loan Officer Compensation Rule, the dangers of co-marketing with other settlement service providers, and how to carefully vet lead generation companies.

Marx Sterbcow, managing attorney with the Sterbcow Law Group, will moderate a RESPRO Marketing Service Agreement webinar with Phil Schulman, partner at K&L Gates on October 22, 2015. The RESPA webinar titled “To Agree to Market or Not Agree to Market” will discuss how MSAs have been around for 20 years and in June of 2010 HUD’s RESPA Division issued an interpretative rule. Now however, after the CFPB’s RESPA consent order in Lighthouse Title, the PHH decision, and the recent CFPB Bulletin 2015-05, Marketing Service Agreements a/k/a MSAs have become a controversial and hot topic. Learn what you can do and what you can’t do based on the latest CFPB guidance.