Fidelity Announces the Suspension of Payments to Brokers Associated with TransactionPoint Referencing Possible RESPA Violation(s)

Our fears have been confirmed. In a memo dated earlier this month, Fidelity announced that, according to HUD, payments made under Real Estate Service Provider Access Agreements, used in conjunction with the TransactionPoint software, may violate RESPA. Fidelity announced that it has officially suspended all payments in conjunction with the Fidelity Access Agreements as of May 27, 2011. Did Fidelity tell you that payments under the Access Agreements complied with RESPA? If so, it appears that HUD does not agree.

We’ve long been critical of TransactionPoint – see our posts here and here. As early as June 2010, RE-Insider was one of the few publications in the nation investigating the legality of TransactionPoint. Hopefully, our warnings encouraged California brokers to take the next step and independently verify whether the TransactionPoint Access Agreement payments complied with RESPA.

RE-Insider never believed that it was permissible under RESPA for service providers to make payments for orders received through TransactionPoint. We tried numerous times to obtain the name of Fidelity attorneys that endorsed TransactionPoint or find a Fidelity in-house lawyer to go on the record about the legality of TransactionPoint and never received a call back.

Now we’re wondering if any broker received a written, legal opinion by a RESPA attorney assuring that the TransactionPoint “pay-to-play” Access Agreements were RESPA compliant. It is hard to believe that any broker started taking payments without first obtaining a legal opinion that RESPA would not be violated.

The fallout from this could be massive. What happens to the participating brokers now? How bad are the possible legal ramifications for each individually-licensed broker? What will Fidelity do if HUD, the Department of Real Estate or others come after the brokers that received payments under the Access Agreements?

As for the memo itself, we found it quite confusing. While announcing that it is suspending payments because HUD believes the payments may violate RESPA, Fidelity also claims that HUD called TransactionPoint a “valuable tool.” Note that this self-serving memo identifies Steve Murnin as the person to contact if you have any questions. Steve Murnin is the same Fidelity Vice-President that explained the role of Fidelity in marketing TransactionPoint in a court declaration published by RE-Insider (click here) Wow! We have a question for Mr. Murnin – – what is the exposure under RESPA for each broker that received a payment from a service provider under one of the TransactionPoint Access Agreements?

Will brokers continue to accept TransactionPoint Access Agreement payments from other vendors that have not suspended payments? Why would any broker ever consider doing so? We are interested in those brokers’ answers.

How will this situation affect the participants in the TransactionPoint Access Agreements, including brokers, agents, and vendors? Please share your thoughts.

  • RE-Insider

    From a reader Mark:

    Great story idea – this is definitely worth a wow!

  • David

    I can’t believe that they have the gall to use that memo as a marketing tool. Thanks for bringing this to my attention. Some real food for thought.

    • RE-Insider

      Thanks for the note David. Keep reading the site.

  • Jaime

    Yikes. A real blow for Fidelity. “But please keep using it” – ha!

    • RE-Insider

      Our thoughts exactly Jamie.

  • Lara

    “Fidelity also claims that HUD called TransactionPoint a ‘valuable tool.'” Questionable, to say the least.

    • RE-Insider

      A lot of people seem to be confused by that idea. But I guess Fidelity is just trying to take lemons and make lemonade.

  • BR

    Where are the State overseers? Fidelity’s TransactionPoint behavior should have being addressed by each Estate licensor: The Insurance Commissioner’s office. Participating Real Estate Broker’s should have being addressed by each State Department of Real Estate. The entire strategy violated consumers but where are the State’s Attorney General?

    The problem is not as complex as you think. Some companies will go back to put illegal practices to generate business for themselves in detriment to consumers and violating laws because they know that those political offices are asleep.

    Sincere congratulations to Secretary Donovan from the U.S. Department of Housing and Urban Development. May your actions serve to wake up the overseers!

    BR

    • RE-Insider

      Great comment BR. I’d like to think that some of the higher-ups are reading what we’re writing.

  • RE-Bob

    It never ceases to amaze me that folks in our industry sink to lowly ethical behaviors. It never ceases to amaze me that the givernment turns a blind eye, What truly does amaze me is when the government wakes up – looks around and not only says,” we’ve gotta do soething about this” but they actually do. Keep these great stories coming. It gives me hope.

    RE-Bob

    • RE-Insider

      It seems that the government has finally had enough. I wonder if people were reaching out to them for answers and they finally responded. Keep your comments coming.

  • MK

    I was pressured by my manager to only use our company preferred providers which coincidentally are the ones that pay our through Transaction Point. When suggesting who to use, I told my clients that these are the only ones that our company recommended. After reading your article on Transaction Point, I am concerened. Am I liable for recommending these companies? Am I liable for hiding the fact that they were paying our broker? Can I be sued?

    • Toby

      Not sure what state you are in MK, but “recommending” any third party entity can come back to bite you. We no longer recommend anyone. We may point them in the right direction, or say we have had a lot of luck with these vendors, but then state that they are free to use anyone you chose. We do not take these nickel and dime kickbacks. But our vendors do occasionally discount heavily to make a deal work. A lost deal is usually worth far more than what you can make by squeezing vendors. Win-win.

  • RE-Insider

    Thanks for the comment MK. If you’re really concerned about this, it might be time to ask a lawyer for advice. Let’s all hope that Fidelity talked to a lawyer before they spoke about Transaction Point.

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