Respa Uncertainty Turns Referrals Into New Legal Battleground

Greg Sher, managing director at Maryland-based NFM Lending, which originates roughly $6 billion in mortgages per year, said the company may be losing business. It’s not because its products or pricing fall short — but because of how some competitors structure relationships with real estate agents. 

In February, one of NFM’s top loan officers declined to match an offer from a top-five independent mortgage bank that had promised a real estate group $2,000 per loan “just for pointing the client in the lender’s direction,” Sher said. He added that conversation centered almost entirely on which lender would pay the brokerage more.

“There are companies out there that are just blindly saying to these agents: ‘Send me your mortgage customers and I’ll pay you,’” Sher said in an interview with HousingWire. “That’s where the problem is.” 

Craig Ungaro, chief operating officer at New Jersey-based AnnieMac Home Mortgage, which originates about $3 billion a year, said his firm faces similar tensions.

“We might be losing partnerships. There are some times when we have to make decisions that aren’t in favor of the relationships, if we have an unwilling partner.”

At the same time, Ungaro cautioned against framing the issue as clear-cut misconduct.

“This isn’t one of those cases where there are bad actors that everybody knows about and nobody’s doing anything about it,” Ungaro said. “There’s a multitude of different things where some lenders may interpret it to be acceptable and some may not. Those two worlds might feel that one is doing something too conservatively and the other is doing something wrong.” 

On the real estate side of the business, Linda O’Koniewski, the broker-owner of Massachusetts-based Leading Edge Real Estate, has ended some partnerships recently. She previously operated a profitable joint venture alongside her real estate brokerage but ultimately decided to shut it down, deciding that the potential legal risk was not worth the added revenue. 

“My attorney once told me: ‘This is not your business. You’re not in the lending business or the insurance business. You guys are really good at real estate. Stay in your lane.’ Since then, it’s almost like I’ve done the reverse of everyone,” she said.

For Sher, Ungaro and O’Koniewski, the common thread is uncertainty — a market where interpretations vary, and the line between partnership and referral compensation is not always clear. 

In most industries, paying a fee or providing a gift to someone who brings in business is commonplace. In the mortgage and real estate sectors, however, the practice is largely prohibited under the Real Estate Settlement Procedures Act (RESPA). 

Section 8 of the law bars the giving or accepting of any fee, kickback or “thing of value” in exchange for the referral of settlement service business involving a federally related mortgage. It also prohibits splitting or sharing charges except for services actually performed.

Payments are generally permissible only when they reflect bona fide compensation for goods or services provided at fair market value, including certain marketing services agreements structured to comply with the law.

But industry leaders and attorneys say the statute — enacted in 1974 — has not kept pace with today’s vertically integrated real estate and mortgage landscape, creating what they describe as an uneven playing field. They argue that ambiguities in the rules, combined with recent aggressive legal scrutiny, are fueling renewed calls to modernize RESPA.

“RESPA is specifically designed to encourage referrals, but referrals made in good faith rather than ‘pay-to-play.’ But the use of the phrase ‘thing of value’ makes interpretation difficult and nobody quite knows where the edges are,” said Troy Garris, co-managing partner at Garris Horn LLP.

“Because of the time it was written, the technology at the time and the regulations promulgated underneath it, RESPA is outdated. In many ways, depending on how it’s interpreted, it could prevent some technology,” he added.

Making the case for modernization

In a 2024 white paper, the Mortgage Bankers Association (MBA) argued that “as consumers in the housing marketplace become more empowered through online shopping and better price discovery and information delivered, RESPA stands as a relic to a past era of real estate-influenced consumer relationships.” 

The trade group urged regulators to modernize the statute by focusing on fair market value standards for desk rentals instead of imposing broad restrictions, and by replacing strict compensation caps on marketing services agreements (MSAs) with clearer consumer disclosures that preserve borrower choice.

The MBA also called on the Consumer Financial Protection Bureau (CFPB) to repeal its 2023 advisory opinion on digital mortgage comparison platforms; to amend Regulation X to allow direct advertising to settlement service providers as long as no referral payments are involved; and to update guidance on affiliated business arrangements to reflect today’s remote and digitally integrated business environment.

Nicole Booth is the director of public policy at Zillow, which is the target of a RESPA lawsuit. While the company has declined to comment on ongoing litigation, Booth said one of the biggest friction points is how Section 8 treats referrals in a digital marketplace.

“Today, consumers shop on platforms like Zillow and other sites where they compare multiple options and interact with ecosystems that blend advertising, referrals and affiliated services all in one place,” Booth said. “The law doesn’t always clearly distinguish between those functions in a digital environment, which can create uncertainty for companies and confusion for consumers.” 

Booth also pointed to disclosure requirements as an area in need of reform, since they were designed for paper-based affiliated business forms.

“In a digital process, repeating disclosures or forcing them at rigid moments can feel duplicative rather than helpful,” Booth said. “The goal isn’t to weaken consumer protections but to ensure transparency is meaningful — delivered in a way that truly helps consumers understand their choices instead of overwhelming them.”

‘Copycat’ litigation emerges

Attorneys say that although RESPA’s language and evolving interpretations have created compliance risks and added costs for lenders and brokers, federal enforcement has not ranked among regulators’ top priorities in recent years.

That shift became more apparent amid a reduced enforcement posture at the CFPB. One example: In February 2025, the CFPB voluntarily dismissed with prejudice a “kickback” lawsuit it had filed just two months earlier against the Jason Mitchell Group, Rocket Homes and others. The dismissal came not long after President Donald Trump took office and the more aggressive regulatory approach by the Biden administration ended.

In the bureau’s absence, private law firms have stepped in. One of the most active has been Hagens Berman, a consumer protection firm involved in similar litigation against Zillow, Rocket Companies, Veterans United Home Loans and the National Association of Realtors. 

Rocket, Veterans United and Hagens Berman did not respond to requests for comment.

“We have seen this happen before — a lot of it is what we’d call copycat lawsuits,” said Richard Andreano, practice leader of Ballard Spahr’s mortgage banking group. “A government agency may bring a RESPA claim against someone that gets dismissed, but if you wait long enough, a private lawsuit will be filed against that same company with nearly identical allegations.”

While such cases face challenges — including whether they can be certified as class actions — their mere existence exerts pressure on real estate brokers, mortgage lenders and title companies to remain cautious, attorneys said.

“The lawsuits certainly cause parties to seek to comply not just with RESPA as it is written, but with best practices that regulators have developed over the years,” said Loretta Salzano, a founding partner at Franzen and Salzano PC.

“In the past, these lawsuits have also changed how parties draft their governing documents for affiliated business agreements and they know they cannot be monkeying with share percentages based on referrals.” 

Worst-case scenario would be ‘devastating’

If the pending cases move forward and result in judicial rulings rather than settlements, they could help clarify lingering gray areas in RESPA and shape how courts interpret the statute.

In the lawsuit involving Rocket, for example, the plaintiffs allege the company steered homebuyers to its mortgage products while directing leads to real estate agents. In turn, the agents allegedly encouraged clients to use Rocket for financing. In 2025, Rocket acquired real estate brokerage Redfin for $1.75 billion — a move the lawsuit characterizes as a “maneuver” to bring the alleged steering practices in house.

“This suit views a referral for a referral as a RESPA violation,” Andreano said. “When HUD had RESPA, they would say that a referral for a referral violates RESPA, but that never made sense to me because mortgage and real estate professionals always refer to each other. That is just the natural course of business, there is no money changing hands and it doesn’t increase the cost of the settlement transaction, which is the congressionally stated purpose of Section 8 of RESPA.”

If a court were to rule that a referral for a referral, by itself, violates RESPA, Andreano said the impact would be “devastating” for the industry. In that scenario, he believes industry groups would likely seek legislative clarification from Capitol Hill.

“Imagine if you have a consumer sitting across from you asking you for recommendations for a lender or a real estate agent because you are a trusted, knowledgeable source, but you can’t give them that information,” Andreano said. “How crazy would that be? I don’t think this is what Congress was trying to prevent with RESPA.” 

Others warn that without consistent federal enforcement, interpretations could vary across courts.

“Without the CFPB in place to really keep things uniform, we could have lots of different opinions,” said Colgate Selden, a founding member of the CFPB and a shareholder at Baker, Donelson, Bearman, Caldwell & Berkowitz PC.

“The industry would love some changes on RESPA, but the CFPB also has a significant list of regulations to work on with a smaller staff.” 

An MBA spokesperson said there are no updates to RESPA modernization calls at this time but added that the trade group is engaged with the Trump administration and the CFPB if and when that changes. 

In the real world…

While calls for RESPA modernization continue to gain momentum, mortgage and real estate professionals say they are focused on establishing practical standards that allow them to operate confidently and serve clients effectively.

Todd Armstrong, a San Diego-based Compass agent and the head of the company’s military division, said that as an agent who primarily works with veterans purchasing homes using their U.S. Department of Veterans Affairs loan benefit, having reliable lenders with a deep understanding of the VA loan product is imperative. 

“My No. 1 VA lender and all the others I work with, I recommend them because they can execute,” Armstrong said. “They understand the calculations of residual income requirements, tidewater notification and all these things that a lot of lenders don’t have a clue about. For me, it is all about execution.” 

Armstrong said he always makes sure to provide clients with at least three recommendations per service they ask about — whether that is lending, title insurance or homeowners insurance. And while he understands why RESPA exists, he does not want his clients to be harmed if the statute is found to prevent him from providing referrals. 

“Transparency in the industry is essential, but an ethical relationship built on client success is what is most important to me — and that shouldn’t be confused with a RESPA violation,” he said. “Reliable lenders protect both the transaction and the client.” 

Holly Spencer Bunting, a RESPA expert and partner at Mayer Brown, said she sees similar dynamics driving partnerships across the industry.

“I don’t think most agents can be persuaded by a random loan officer, who doesn’t provide great customer service and isn’t going to help them close the transaction, offering them an incentive,” Spencer Bunting said. “The true motivation is who can be a good partner, and make sure that the customer is getting good service and ultimately close the transaction.”