Three Marketing Arrangements and a Gift Card
Priya is a Missouri-licensed MLO at a brokerage whose Missouri license is active. To build purchase business she proposes three arrangements. First, she would pay a local title company $150 for each closed loan that the title company refers to her. Second, she would rent a desk in a real estate office for $600 per month, and the agents there would hand out her cards. Third, she would pay an unlicensed "marketing consultant" $500 per funded loan to run social media ads and pass along the leads he generates. Her branch manager says all three are fine because "we're not paying for the referral itself - it's for marketing or rent." A real estate agent also asks for a $250 gift card for each client who closes with Priya. Priya's own commission is not affected by any of these arrangements, and she wants to know which ones she can actually use.
1. Classify each of the three proposed arrangements and explain the reasoning that separates them.
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The analysis turns on what the money is actually buying and whether the recipient is doing legitimate work at fair value.
Title company, $150 per closed loan. This is a thing of value given in exchange for the referral of settlement-service business, which is the classic prohibited kickback pattern under Section 8 of RESPA for federally related mortgage loans, and the fact that it is labeled a marketing fee does not change the substance. It is also a fee to an entity for sending borrowers rather than for a service rendered to Priya. Not usable.
Per-funded-loan payment to an unlicensed consultant. Paying compensation that is calculated from loan volume, to a person who is not licensed to originate, is both an unlicensed-activity problem and an inducement structure. Calling it advertising does not fix a payment formula tied to closed loans. Not usable as structured.
Desk rent at $600 per month. This is the one with a defensible path, but only if it is a bona fide, arm's-length rental: a written lease, a rent amount consistent with fair market value for comparable space, payments that do not vary with referrals or loan volume, and no condition that agents refer anyone. If the rent is a disguised referral fee or the office steers business as a condition, it fails.
The gift card per closing is a per-transaction payment to a person for sending a client - a referral fee in retail clothing. Not usable.
2. Rewrite the desk-rental arrangement so it survives scrutiny, and identify the records Priya should keep.
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The goal is to make the rent look like what it claims to be: payment for space, not for borrowers. That means a written lease between the brokerage and the real estate office, signed by authorized parties, describing the specific space and term. Rent should be set by reference to comparable office space in the market - a market survey or a broker's opinion is good evidence - and should be flat, billed monthly, and unaffected by how many loans close. The lease should state expressly that neither party is obligated to refer business and that no payment is contingent on referrals. If the office wants to advertise a co-marketing relationship, that advertising should be paid for at fair market value with an invoice documenting the service, separately from rent.
On records, Priya and the brokerage should retain the lease, proof of the market-rate determination, monthly invoices and proof of payment, and any co-marketing invoices. If agents hand out her cards, her advertising must carry the required identifying information, and the brokerage should be able to show it approved the materials. The point of the paper trail is not bureaucracy: if the arrangement is examined years later, these documents are the difference between a rental and a referral fee.
3. A real estate agent offers to route clients to Priya in exchange for the gift cards. What should Priya say, and what should she do if the branch manager insists the practice is acceptable?
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She should decline clearly and explain why in business terms the agent will understand: paying a settlement-service provider or a real estate professional per closed loan for referrals is an inducement that can trigger refund demands, civil penalties, and licensing discipline, and the cost falls on the brokerage, not just on her. She can offer lawful alternatives - hosting a first-time-buyer class, paying fair market value for a legitimate co-marketing piece with an invoice, or simply earning referrals through service.
If the branch manager insists the practice is fine, the reasoning should escalate from persuasion to documentation. She should ask for the approval in writing, including the compliance rationale, and route the question to the brokerage's compliance function or outside counsel. She should keep her own files clean: no gift cards purchased from her funds, no reimbursement requests for them, and a record of her objection. Licensing discipline follows the individual as well as the company, and "my manager said it was fine" is a weak defense when the payment structure is visible in the company's own expense records.