On Notice: Mortgage Comparison Sites

Mortgage News February 21, 2023

According to the Consumer Financial Protection Bureau (CFPB), certain mortgage comparison platforms may be violating section 8 of the Real Estate Settlement Procedures Act (RESPA).

Based on the CFPB’s advisory opinion published on Tuesday, an operator is violating the RESPA section 8 if it provides enhanced placement or otherwise steers consumers to certain operators.

The CFPB stated that mortgage comparison sites will be liable for a prohibited referral fee if they are using or presenting information non-neutrally that steers consumers to use, thus constituting referral activity, and if they receive a “payment or other thing of value” that is, at least in part, for the referral activity.

An operator may receive payments from the settlement service provider under a contract agreement so as to join the platform through which referrals are generated under the term “thing of value”.

Depending on the operators’ business model, a full list of participating providers could be offered, but only a subset of the higher-paying providers would be provided with web links.

A mortgage comparison site may rank lenders by mortgage rate on the first page if they pay more to the operator. There are participants with the same or lower interest rates who appear to be ranked lower on the second page because they pay less to the platform because they pay less to the operator, although the platform appears to have ranked all participants by interest rate.

In using or presenting mortgage comparison information in a non-neutral manner, the operator “puts a thumb on the scale,” according to the Consumer Financial Protection Bureau.

It is also possible to be violative of the Dodd-Frank Act’s prohibition on unfair, deceptive, or abusive acts or practices (UDAAPs) if you receive payment for steering or otherwise influencing the consumer.

During its implementation on June 20, 1975, Section 8 of RESPA was designed to help consumers choose settlement services wisely and reduce kickbacks and fees, which may increase the cost. Those who violate Section 8 are subject to civil as well as criminal penalties.

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