Anti-Kickback Rule as a Loan Officer in the Mortgage Landscape
What you can do might surprise you!
As PRMI's Director of Compliance, I frequently must deliver the answer "No" to many. Though daunting, I aspire to emulate Jim Carrey's character in "Yes Man" and provide affirmative responses whenever possible. While always saying yes isn't feasible, I aim to enable our partners' success by leveraging one of PRMI's core pillars of Entrepreneurial Freedom through Teamwork and Advocacy. My goal is to coach our partners on turning a "No" into a "Yes" by navigating complex rules and regulations effectively.
A Story of Turning a “No” into a “Yes”
I often get calls or emails from our loan officers seeking guidance on RESPA Section 8, the anti-kickback rule. It’s usually about an amazing event idea they have or a marketing plan they want to do with their real estate friends. One day, years ago, I was talking to a newly licensed LO. He had a good understanding of the rule itself but didn’t really know how to apply it to his idea. He went on to tell me his plan, the costs involved, and mainly wanted to know what he could do and stay within the RESPA lines. I found myself saying, “No, you can’t do it this way,” and “NO, you really can’t do it that way.” He finally said, “Why don’t I let you think about this a little and help me find a way I CAN do it?” I chuckled and realized I needed both my Compliance hat and my Sales hat to guide this loan officer successfully.
I wanted to make a deep impression on this LO so he would trust that corporate, especially Compliance, truly has his best interest at heart and would be encouraged to come to me with other ideas in the future.
This newly licensed LO reminded me of my brother when he was 16 and I was 18. We worked for a Visa Card Rep company and my brother would give me sales pitches and pointers on how to “Nail the Sale”! I would often look at him with the sister side-eye thinking, “There is also consumer protection at play, and the last caller I just helped had too many credit cards”! Aaaaa! Sales and Compliance, always a tough mix.
So, after pondering I figured it out and called my new loan officer back the next day. With some research and careful planning, we made his idea work compliantly. It was a preferred lender arrangement, that at first appeared to cover marketing costs for the real estate agent he was working with. I explained that the focus of any cost incentive needed to be offered to the consumers and not the agents, however, it would still benefit the agent, by creating leads for both. This campaign went on to form many more consumer incentive offers that our company has made over the years.
Showing Appreciation Without Expecting Referrals
So, what can we do to show our real estate friends that we appreciate them and their business, but don’t expect referrals? The answer is A LOT! And why are we waiting for Christmas to send the pie with the marketing flyer? Get that Christmas in July spirit and watch the opportunities unfold!
RESPA Section 8 has provisions regarding gift giving and event planning that can make both you and your real estate professionals more successful. Schedule that BBQ, take them to the pickleball court, or even host a local golf game. RESPA says if the marketing or training on our products takes place, you can invite your real estate agents out to dinner, lunch or other outings and cover the cost. The goal is not to expect or imply that you expect a referral but to provide valuable mortgage information.
Sell yourself. Your knowledge of the products in your area goes a long way. If more personal marketing is happening, imagine when two or three of you brainstorm! You might bring up a program in your discussions that will fit perfectly into what a current client of theirs is trying to achieve. There are lots more opportunities for that, with seminars or events hosted by your teams.
Giving promotional items or “Swag” is another popular marketing strategy. But did you know the Swag does not need to be given separately without other gift ideas? For example, you can give a branded cheese board with cheese, and to make it fun, cater promotional gifts to the seasons. Do you have too much swag and need to give some away? Set it out at open houses or have it at your BBQ or other events on a table for your contacts to choose.
Another thought to keep in mind is that there are not enough first-time home-buyer events happening in communities. Hosting the events not only helps the borrower, but the lender considering it’s a part of a Community Reinvestment effort. Lenders are often examined by the state licensed authorities according to the Community Reinvestment Act (CRA), which means a lender will experience tests from the states that adopt these initiatives, and those lending test results could be made public. Lenders do not want to rank low on CRA, they want to prove that they give back to the communities through marketing events, first-time home-buyer meetings, and marketing through charities. Be the Division or Branch that gives back to the community by hosting these events and creating clients! Those borrowers may get a housing or other down payment assistance loan today, but if you can take care of them with that, they will be your customer in the future.
Key Takeaways
So, to recap: You can give and receive. Keep the educational focus, transparency, nominal value (don’t give a TV or $200 pair of boots), and documentation. Maintaining records with the mortgage products you covered, event details, and co-marketing cost that you split, will be the key to ongoing success with RESPA and the relationships you have cultivated.
Good luck out there in the sales landscape, and don’t forget to reach out if you need some advice on how to get to the YES!
Merry Christmas in July!