Rethinking RESPA: How To Balance Consumer and Lender Needs in 2026

With increased regulatory scrutiny on marketing service agreements, referral fees, and a new political administration changing dynamics for lenders, this session will explore the evolving landscape of the Real Estate Settlement Procedures Act. Attendees will gain critical insights into navigating the complexities of the rules, exploring how lenders can modernize compliance practices and foster beneficial relationships with real estate partners. The session will focus on balancing consumer protection and transparency with the need for competitive, efficient loan origination.

Transcription: 
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record. 

Mitch Kider (00:08):
Thank you to National Mortgage News for inviting us here and asking us to put this panel together, and thank you to all you guys for hanging in there with us. It's been a long day. It's the second day, and it's good to see you with me today. Immediately to my left is Rich Horn from Garris Horn and Peter Idziak from Polunsky Beitel Green. You just saw Marty Green talking a minute ago. And of course, Joshua Weinberg from First Line Compliance. I should know that because they're an excellent firm. So for the next 29 minutes, we've got 29 minutes over here to talk about a 51-year-old statute. Can you believe it? A 51-year-old statute that throughout its history really has been controversial. It's been controversial since the day it came into existence, and it remains controversial today. I know we just heard a panel about things being dropped and things being changed, but you're actually not hearing about Section 8 of RESPA, which is what we're going to talk about today. You're not hearing about Section 8 of RESPA potentially being dropped. It's not in the CFPB's regulatory agenda. There's no mention of it at all. In all honesty, that's what we're going to talk about. So what is Section 8 of RESPA?

Section 8 of RESPA, as I said, is 51 years old. It was signed into law by President Nixon shortly before he resigned office. It came about because of the title industry, not because of the mortgage industry, quite frankly. There was a study done in the Senate and in the House as to why the cost of housing and closing loans was in fact so high. Sounds familiar, right? Well, they had that same issue back then, and they made a determination that a lot of it was caused by really high title insurance costs. When they looked into it, they saw that title companies were paying a fair amount of kickbacks and referral fees to get that business. They thought to themselves, well, maybe we can fix this particular problem, but we'll do it for an entire industry itself. So what is it? Section 8 of RESPA at its heart is an anti-kickback and anti-referral fee provision. ¹ For example, are there loan officers in the room today? There you go. So you know that you cannot go over to a real estate agent that is sending you business and pay them for that particular referral. You cannot pay them for their recommendation that goes to a consumer or anything else along those particular lines. That's because of Section 8 of RESPA. So how does it work? You have Section 8(a) of RESPA: No one shall give and no one shall accept anything of value in exchange for an agreement to refer business incident to a settlement service. ² Anything of value is really important because it's literally anything of value that we're talking about.

Richard Horn (03:30):
This regulation even defines it with a long list of examples of things of value, and at the end, it even says "things."

Mitch Kider (03:37):
Yeah, exactly. Virtually anything. If someone's got a benefit by your actions, that's a thing of value in and of itself. Then there's Section 8(b) of RESPA, which ties it together a little bit and says, if you're a settlement service provider and you've collected a charge or a fee for the settlement service that you performed, you can't share that with anyone. You cannot split that fee. You cannot share that with anyone other than for services that are actually rendered. So you look at Section 8(a) and 8(b), and you say, alright, well, that's easy enough. They're putting me in a separate silo over here; I basically can't talk to anyone and I can't really do business with anyone else that is referring business to me. But that's not true. Because they thought about that and thought, well, companies need to be able to work with each other. There's a certain synergy that ultimately benefits the consumer. So they put together Section 8(c), and 8(c) provides the exemptions.
The most important one is Section 8(c)(2): even if someone's referring business to you, you can pay that person the reasonable market value for the goods, facilities, or services that they otherwise provide. Reasonable compensation translates into reasonable market value. The other important Section 8(c) exemption is for affiliated businesses. That came about in 1983 after a congressional debate that lasted almost three years. Someone said we have a problem because companies can't join their forces. Real estate companies want to be in the mortgage business; mortgage companies wanted to be in other settlement service businesses themselves. Yet, if you're in the same corporate family and you're profitable, you're going to dividend up something. Someone's going to get a thing of value because of the referral. There was a three-year debate; one school of thought said to put them in silos, and the other was that consumers benefit from the synergy. So, let affiliated companies make referrals to each other, but they have to give a disclosure, not require the use of the affiliated party, and they can't get anything but a return on their ownership interest. For my panel here, I have the first basic question. We have heard forever that Section 8 is problematic and gets in the way of everything. But as you heard, it's basically an anti-kickback, anti-referral fee statute. ³ What's wrong with Section 8? Many industries, like healthcare, do not allow kickbacks or referral fees. Let me ask you guys, what's the problem? Why are we always hearing about how this needs to be changed? Rich, let's start with you.

Richard Horn (07:26):
Sure. This relates to the discussion on the previous panel about what's happening to the CFPB right now. Jonathan mentioned that they have a very long regulatory agenda, and a lot of the rules on that agenda—at least they say they're working on them. We'll see if they terminate 90% of their staff whether they'll have the people to work on it, but at least they put out an agenda. A lot of those are rescission rules. They're thinking about rescinding LO comp and discretionary mortgage servicing rules. But what you don't see on there is RESPA Section 8. There's no mention about rescinding Regulation X's implementation of RESPA Section 8. I think that's unfortunate because the CFPB could right now engage in an era of regulatory reform. If they really wanted to look at what would be best for the industry and the public, they could look at RESPA Section 8. The statutory prohibition is very broad, and "thing of value" is a very broad concept. The way it's been implemented by federal agencies in the past has been very interpretive. It's basically, "I know it when I see it."
Also, one of the problems with Section 8 in the past has been that a lot of the guidance has been through policy statements and interpretive letters; you have to go digging through informal guidance to see what the CFPB is thinking. Even now under former Director Chopra, and actually under Kraninger too, the guidance has not been in the actual Code of Federal Regulations. It's been through FAQs on the website, supervisory highlights, and Advisory Opinions handed down without notice and comment. I'm glad you talked about the history and the purpose of RESPA because one thing the CFPB could do is look at whether RESPA is actually achieving its purpose. Are these relationships between lenders, realtors, and title companies actually increasing closing costs for consumers? Smart economists could probably do a study on that and see if, in the modern economy, we really still need RESPA Section 8. Plus, we have a lot more federal mortgage rules now that weren't in place in the seventies. The disclosures are better, like the TRID rules. I'm biased—I led the TRID rule when I was at the CFPB—but it's a great disclosure that tells the consumer exactly what they're paying and puts restrictions on how high those costs can increase. Do we really need RESPA Section 8 anymore? That is another important question the CFPB's Office of Research could look into.

Mitch Kider (11:17):
Let me unpack that a bit. It sounds like from your perspective, Section 8 is broad and somewhat ambiguous. It also sounds like you're suggesting that given we are at a digital mortgage conference, the world has changed. But on the question as to whether or not we really need RESPA Section 8: what about that loan officer at a smaller company originating a billion dollars a year? Without Section 8, are they going to be able to survive when mega players start throwing more and more money at real estate agents for their connections? We've seen that evolving over time. Josh, I see you shaking your head. What do you think?

Joshua Weinberg (12:29):
First, thanks to National Mortgage News for having me. I just want to make sure everyone understood the masterclass you just got on the history of RESPA Section 8—50 years covered in five minutes. I was really impressed.

Mitch Kider (12:44):
Believe me, I had nightmares about how I was going to do that.

Joshua Weinberg (12:47):
To the question, I absolutely agree that there is a leveling of the playing field. If there were no Section 8 of RESPA, the biggest pockets paying the biggest referrals would distort the market. To the question "what's wrong with Section 8," I'll say two things. One, Rich, you touched on this: execution opposite intention. Section 8 has actually increased costs to consumers in some cases by not allowing the easy exchange of referrals. Second is enforcement that doesn't necessarily follow the rule. There's at least one of us on this panel who was incredibly successful at beating down a RESPA claim where the judge said "nothing means nothing" in this statute. It was a critical comment and it shows that because of the ambiguity, regulators have often taken it upon themselves to enforce beyond what the regulation actually requires.

Mitch Kider (14:03):
Yeah. Peter, what do you think? Does RESPA Section 8 need to be fixed, and if so, can it be?

Peter Idziak (14:12):
I agree with everyone else that at its core, it's a good idea and it still has a place in the modern mortgage market. Can it be fixed? I think so, especially with the CFPB under Chopra and other regulators taking an expansive role on prohibitions and applying them to situations explicitly not covered by Section 8. Since RESPA is an act of Congress, it would take Congress to put guardrails in place to provide more clarity. With older legislation, the idea was Congress writes a general rule and regulators stay in their lane. Now you have regulators looking for existing acts and saying, "here's a hook, what can I use this for?" We've seen that with RESPA and UDAAP. Congress needs to step up and rein back in the regulators.

Mitch Kider (15:17):
I think you're right. I've spent a career fighting against regulatory overreach because I don't believe that if you're not elected, you should be making laws without notice and comment rulemaking. I think the biggest problem with Section 8 is not that it's an anti-kickback provision—I think that's helpful to consumers and keeps prices down. I think it helps loan officers by keeping a competitive market. The real problem is that it's been so politicized. Regulators—HUD first and then the CFPB—have used it to tell you who you can do business with and to dictate your relationships with referral partners in an inconsistent manner. The case Josh was referring to was the PHH case, which I litigated. ⁴ It had to do with captive mortgage insurance reinsurance. For 20 years, based on a letter by the regulator saying it was okay, PHH had a captive reinsurance company. It was the first case brought by the CFPB when Richard Cordray came in. He looked me straight in the eye and said, "I don't care about 40 years of interpretation; they interpreted it wrong." He asked for close to a billion dollars. We took it to court and went before a full panel of the DC Court of Appeals. The judges put together a 110-page decision basically saying we're going back to the way RESPA has always been interpreted. They were somewhat offended by the way the CFPB acted.
What bothers me today is that the FDIC is a pretty tough regulator on banks, and I'm told that in some examinations, the FDIC is taking the position that if you are brokering a loan, you can't get paid on basis points; you should only be paid on a flat fee. That flies in the face of 51 years of interpretation. So, how are we going to fix this?

Richard Horn (18:49):
That's the problem I was discussing: the regulation can be interpreted as broadly as the statute. There hasn't been an agency that's gone in and tried to put some more meat on the bones of the regulations. Even under Cordray, when they went after PHH, it wasn't about amending the regulation through notice and comment; it was about throwing out the old HUD interpretation and going after companies retroactively. It is an unfortunate missed opportunity because instead of throwing out all the rules, we should be revisiting RESPA to try and embed clarity.

Mitch Kider (19:52):
Do we think there's any chance that this current administration or the acting CFPB leadership is going to step up and undertake RESPA reform? Do we think they're going to amend Regulation X or issue new guidance? It's not on the agenda.

Peter Idziak (20:20):
It's not on the agenda. Regardless of political party, regulators enjoy having the flexibility and don't want to limit themselves. Maybe this administration takes a path of not enforcing Section 8 violations unless they see significant consumer harm. But regulators seem to hate being buttonholed into answering specific questions. It would be great if we had a more specific and current FAQ published because there are lots of business practices where, even 51 years later, you scratch your head as an attorney and say, "maybe, maybe not."

Mitch Kider (21:13):
Who is going to enforce it out of the CFPB? They are almost all gone. If the CFPB is basically not examining or enforcing this right now, should we even care about RESPA compliance? Josh?

Joshua Weinberg (21:36):
Emphatically, yes. State regulators care a lot about RESPA. The lookback period on RESPA is going to be longer than this administration is in place. Examination is backward-looking. The interpretations of this administration may not be those of the next. As an industry, we have done a really good job of cleaning our house over the last few years. This is not the time to put skeletons in the closet that are going to haunt us three or five years from now. We are just starting to come back to profitability. You do not want a RESPA violation to be what shuts you down three to five years from now when we're actually making money.

Mitch Kider (22:45):
Or even today. It's only been two and a half weeks since six RESPA class action lawsuits were filed dealing with marketing service agreements (MSAs) and co-marketing arrangements. So, that exposure has not gone away. Let's tie this to the last two days of AI and digital mortgages. Back in February of 2023, a guidance letter was issued by the CFPB that dealt with comparison shopping. Who wants to summarize what that's about?

Richard Horn (24:01):
I'll try to be brief. This 2023 Advisory Opinion laid out what the CFPB thinks is wrong under Section 8 regarding digital mortgage comparison shopping websites. ⁵ Their problem is when these websites list lenders "non-neutrally"—meaning they highlight one provider over another—and they say that is a referral in violation of Section 8. ⁶ A lot of folks have a problem with this because the opinion doesn't explain how it hits every element of Section 8; it just says we have a problem with it. They see it as a "steering" issue, which is more of a UDAAP issue, even though Section 8 technically isn't an anti-steering provision.

Mitch Kider (25:47):
You can see how RESPA tentacles get into everything. We've got less than three and a half minutes left. Let's do a little lightning round. Answer true or false. Do you need a written or oral agreement to refer business in order to have a Section 8 violation?

Peter Idziak (26:15):
False. It can be shown through an understanding based on a pattern or practice of business.

Mitch Kider (26:20):
Does RESPA Section 8 require that if you have a co-marketing agreement with someone else, you split the fees equally?

Peter Idziak (26:29):
False. It's actually proportionally. You have to analyze who is getting the benefit of the advertising.

Mitch Kider (26:39):
Peter is the RESPA king of the day. If a lender also owns an appraisal management company, does requiring the use of that affiliate violate the RESPA prohibition against "required use"?

Joshua Weinberg (27:02):
No. RESPA contains a specific exemption for appraisers, title insurance, and closing attorneys.

Mitch Kider (27:14):
Can a lender pay its own W2 employees for making a referral?

Richard Horn (27:20):
Yes, there is an exception in Regulation X for paying your employees for referrals.

Mitch Kider (27:28):
And the reason is that your employee is an extension of your company, and you can't refer business to yourself.

Richard Horn (27:36):
One interesting thing is that "employee" doesn't have its own definition in Regulation X, which leads to gray area cases.

Mitch Kider (27:48):
Can a builder that is affiliated with a lender offer a credit or concession to a buyer exclusively if they use that affiliated lender?

Joshua Weinberg (28:03):
Yes, so long as the Affiliated Business Arrangement (AfBA) disclosure is provided and the consumer is not penalized for not using the affiliate.

Mitch Kider (28:18):
Can a lender employ a real estate agent as a W2 loan assistant in order to pay for referrals?

Peter Idziak (28:31):
No. You cannot bring someone on just to pay for referrals. If they are a bona fide employee with actual job responsibilities, that's different, but FHA recently removed that prohibition.

Mitch Kider (28:57):
You guys are experts. We are out of time. Thank you, guys.