Ed. #102: RESPA and “Reverse” Referrals

Is there even a "referral" back at all?

Dry January?

We open 2026 after a couple short week holidays[1] and amid discussion of the inverted food pyramid and challenging efforts to achieve a “dry January”.[2] But, here at the Levy School of RESPA Compliance (LSRC), we like to invert your RESPA understandings and make RESPA anything but a dry topic. So, I’m going to start the Musings off this year with a detailed explainer about a percolating RESPA issue and finish with an aside giving the devil his due (wait for it). Hopefully, none of this will challenge your actual dry January goals.[3] Now, on to the show.

Zillow, UWM, and Reverse Referrals

There has been a fair amount of buzz in the real estate industry about Zillow’s Preferred agent program (f/k/a “Flex”). Notably for the LSRC, real estate salespeople have questioned certain expectations Zillow has for its participating agents in connection with referring leads involving commission sharing.[4] Zillow’s expectations seem to mostly involve service level standards, but the aspect of Zillow’s program that has generated the most interesting RESPA discussion relates to Zillow’s expectations for participating agents around encouraging Zillow referred leads to get pre-qualified[5] with Zillow Home Loans.[6]

I have heard other RESPA knowledgeable folks call this expectation to send a lead back to the lead generator a “Reverse Referral,” a name I do not love, but will reluctantly use for convenience until I can explain the LSRC approved name later.[7] While Zillow may be getting the most attention for the Reverse Referral issue in agent circles, they are certainly not the only big industry player who is prominently engaged in similar Reverse Referral expectations.[8] For example, I can’t imagine that UWM just paid $115 million to name the Phoenix Suns home arena “Mortgage Matchup Center” just to give away all the consumer borrower leads that publicity generates for UWM’s mortgage matchup website to any ol’ mortgage broker who might send their customers to Rocket Mortgage or some other wholesale lender.[9]

Everyone does it

Now, many LSRC students may suspect something is fishy about relationships where a lead source expects the customer to be steered back.[10] But, before pointing an accusatory RESPA finger at any Reverse Referral expectations of industry giants, consider the following common occurrence for individual settlement service providers:

Let’s say you are a mortgage originator, and a past customer calls you. The customer is thinking about buying a bigger home, doesn’t have a realtor yet, and wants to find out what they can afford. “Of course!” you say, “I would be happy to provide that kind of information (without an application for a specific loan) based on some assumptions.” To be clear, that is exactly the kind of consumer financial assistance you have been trained and licensed to provide. But, also of course, you won’t get paid anything unless that consumer both (a) finds a house, and (b) you get to finance it for them.

So, unless you are a dually licensed real estate broker or already in some kind of affiliated relationship with a real estate company, to convert that loan customer lead into a commission check, you are going to need to get that consumer some help from a third party to find a house. In other words, you are almost certainly[11] going to refer that customer to a real estate agent, builder or website to find a house. Now, anyone who has spent a week or two in the mortgage business should know what happens next.

Violate RESPA?

Yes, quite obviously, the ironclad, time-honored, thing that everyone does in that situation will be to violate RESPA.[12] I kid about assuming an intentional violation and will make an argument later to reverse myself on the question of whether it really is a violation. But, as a practical matter, considering the elements of a RESPA violation and, in particular, the manner in which “referral” has been defined by RESPA’s implementing regulation, Regulation X,[13] the LSRC faculty needs to clearly articulate the apparent RESPA danger in the ensuing action you will take on behalf of your customer and yourself if you are not clear about your narrative.

Elements of a RESPA violation?

First, however, let’s illustrate the danger of why articulating a compliant LSRC RESPA narrative for Reverse Referrals is so critical by walking through the elements of a RESPA violation. The next thing that mortgage originator is going to do for that consumer[14] is: refer[15] that customer[16] to a real estate agent, builder, or website[17] who agrees or understands[18] that in return for[19] the referral that they will affirmatively influence that customer to work with the originator as the lender on any transaction they do with that customer. (see footnotes 13, and 15-19 if you are new to RESPA or the LSRC and want further details on the elements of a RESPA Section 8 (a) violation)

Voila! You have met the elements of a RESPA violation just by helping the consumer to find a realtor because your referral of the lead (which is a thing of value) to the real estate agent(s) you recommended comes with an expectation of a Reverse Referral.[20]

Is RESPA really that unforgiving?

Something about this concern over Reverse Referrals under RESPA, however, doesn’t seem quite right here at the LSRC. As drilled into the heads of LSRC’s students and often mentioned in these Musings, RESPA compliance is largely a question of articulating a compliant narrative. So, are RESPA’s anti-kickback provisions really this unforgiving to the natural self-interest of settlement service providers who provide leads to other providers in the first place? Surely there is a compliant narrative for the Reverse Referral I described above for individuals, right?

Frankly, it is hard for anyone on the LSRC faculty to imagine that RESPA’s statutory antikickback provisions were intended to capture these Reverse Referral situations. It would be absurd for the drafters of RESPA in 1972 to have contemplated that a settlement service provider with a past customer is supposed to give their leads away for free to another provider left only with a hope and a prayer that whoever you give the lead to doesn’t steer your customer to your competitor(s).

Anti-Referral vs. Anti-Steering

This absurd situation is a direct result flowing from how HUD defined “referral” in Reg X. over 40 years ago to encompass steering activities beyond mere referrals (see fn. 13 for the Reg. X definition regarding “affirmative influence”). Specifically, HUD’s overly broad definition of “referral” seeks to convert RESPA’s Section 8 (a) anti-kickback provisions into an anti-steering law. Steering can be good (when consumers are steered to competent and effective providers) or can be bad (when consumers are steered to bad actors), but RESPA’s prohibition on kickbacks for referrals was not intended to cover it and the potential conflicts of interest inherent in those relationships. Rather, conflicts arising from steering are properly addressed in UDAAP laws and through professional and/or fiduciary obligations. With most UDAAP concerns disclosure is sufficient to address conflicts, but for others professional obligations can prohibit them entirely.

There is no referral in “Reverse Referrals”

To be clear, RESPA does not prohibit referrals (or steering). RESPA only prohibits kickbacks in return for referrals. In these so-called Reverse Referral relationships there is no kickback for a referral because, rejecting the expansive Reg X. definition, there is no “referral” back to the lead source by virtue of any affirmative influence/steering. The expectation of affirmative influence to return a customer or even an expectation of neutrality[21] is not a RESPA concern because, again, there is no “referral” of a customer the lead source already had to begin with. That is, the lead source doesn’t want or need a “referral” of a customer they already have. Steering, in this case, should not be converted to the same thing as a referral. Those words mean different things and those meanings matter. HUD should have focused on “introducing” a consumer to a provider as the definition of “referral” rather than the influencing of a consumer to use a provider the consumer is already working with.

A better name for it-CPA

In any event, Reverse Referral is a terrible name for a compliant narrative of what is occurring in these relationships. The customer already is working with the lead source, so the activity that RESPA allegedly prohibits (affirmative influence) is not a referral at all. Again, the RESPA statute itself only uses the term “referral”. It does not mention steering or affirmative influence, so Reg X.’s inclusion of steering into the definition of referral seems open to judicial challenge.[22]

As a reminder, I’m not your lawyer and this blog should not be taken as legal advice, but a more compliant description of the activity in these so-called “Reverse Referral” situations (without the RESPA violation-laden language) would be simply to call it a “Cooperative Provider Arrangement” (CPA). In a CPA, the initial referral from a lead source still cannot be in return for a thing of value (unless an exception like 8 (c)(3) applies), but any steering of the consumer back to the lead source should not be viewed as a referral at all (reverse or otherwise). Rather, any steering arising from CPA relationships should be regulated through the lens of UDAAP (where, unlike RESPA, disclosure is a solution) and further subject to professional/fiduciary obligations. Again, consult a lawyer if you have any questions about your individual circumstances in connection with CPAs.

Giving the devil his due?

Meanwhile, aside from bedeviling RESPA issues, try as I might not to report on case law, sometimes I am compelled by powers of amusement I do not understand. This one I guess caught me idle as I read the SCOTUS Blog. I assume the SCOTUS Blog author was amused too, but decided to let Res ipsa loquitor, but for your amusement:

On January 6, 2026, The U.S. Court of Appeals for the 7th Circuit on Tuesday dismissed a lawsuit from the Satanic Temple, “a nonreligious group that advocates for benevolence and empathy,” that aimed to force changes to Indiana’s 10-week abortion ban, which was enacted “in 2022, shortly after ... Roe v. Wade was overturned,” according to Courthouse News Service. The Satanic Temple had contended that Indiana’s abortion law “unfairly blocks the organization from providing telemedicine abortion care” and subjects its members to “a stigmatic injury” because they are “perceived as evil” due to their support for abortion. The 7th Circuit panel held that these injuries were not concrete enough to give the Satanic Temple “standing to sue the state.”

According to the Courthouse News Service, The Satanic Temple maintained that its members have suffered a stigmatic injury because all of its members deal with the stigma of being perceived as evil people because they are pro-abortion.

“Perceived as evil”??

I have absolutely nothing to say about the Satanic Temple’s members rights to express views on abortion, but I will offer this piece of wholly unsolicited, but patently obvious, advice to its members: if you don’t want to be perceived as evil, maybe don’t name your church the Satanic Temple.

---

[1] Actually, I ended up working several 12 hour days in the week prior to 12/31 to get a summer camp deal closed. Congrats to buyer and new camp Director extraordinaire Jack Schott, his business partner Andy Shlensky, and seller Scott Brody on the sale of the outstanding K&E Camps in Wilmot, New Hampshire.

[2] My wife and I refer to it as “damp” January.

[3] Read this article for some insights on how to be successful at dry January.

[4] Pursuant to an express exemption (codified in Section 8 (c) (3) of RESPA’s statutory provisions), a licensed real estate company like Zillow can obtain a share of the commissions earned by another real estate agent/company for any lead referred to another real estate agent/company. Several recent lawsuits, however, have been filed against Zillow and others in connection with these arrangements under RESPA and other statutes including RICO and unfair deceptive type laws.

[5] Although not dispositive of the RESPA compliance analysis, tying program expectations to pre-qualifications of Zillow’s affiliate rather than conversion of leads into actual loans improves Zillow’s compliance narrative and enables an argument that there is no “required use” which could destroy an affiliated business arrangement’s RESPA safe harbor.

[6] I have done some legal work for Zillow Home Loans (mostly related to loan originator compensation compliance) but I have not represented Zillow in connection with its RESPA compliance or the Zillow Preferred program.

[7] By the end of this Musing you will understand my consternation with that name.

[8] To be clear, I offer no RESPA opinions here on the Zillow Preferred Program or any other specific program involving so-called Reverse Referrals, but hopefully, I can illuminate an LSRC path to a compliant narrative.

[9] I have discussed UWM’s RESPA exposure and its competition with Rocket Mortgage in many prior Musings (most recently last October).

[10] RESPA, however, is not some kind of all-purpose consumer protection law. As explained later, suspicions about Reverse Referrals, are better grounded in an “unfair deceptive” (UDAAP) type analysis than RESPA’s anti-kickback provisions.

[11] According to the National Association of Realtors in 2023 almost 90% of customers found a house with a Realtor. Maybe that is changing?

[12] Read on, however, to find out why maybe that assertion of a RESPA violation is not as clear as many regulators, class action attorneys and enforcement officials would have you believe.

[13] According to Reg X. “A referral includes any oral or written action directed to a person which has the effect of affirmatively influencing the selection by any person of a provider of a settlement service …...” [emphasis added]

[14] Unless you freelance mortgage advice to consumers without desiring to be paid for that work… like being a free mortgage blogger or a faculty member of the LSRC.

[15] Any requirement to use a particular provider is under Reg. X also defined as a referral, but I am not discussing the issue of requirements in this post.

[16] Unnecessary to explain, but important to the RESPA violation analysis, a referral of a potential homebuyer lead is a thing of value to a real estate agent, builder or housing related website. Even more obvious is that the referral is for settlement services.

[17] As a reminder, RESPA’s anti-kickback provisions are two-way violations and apply to everyone, not just settlement service providers.

[18] We can split hairs about whether there really is an agreement if it isn’t in writing and is merely an unspoken understanding, but I will remind everyone that in the statute RESPA says, “agreement or understanding”, so it doesn’t matter.

[19] Claiming that a referral back of a lead was solely because that originator was the best provider for the job is unlikely to be believed even if 100% true. Regardless, whether that is true, the understanding about referring the customer back is going to be almost impossible to deny.

[20] There is virtually no circumstance you will refer that customer to agents who you know are going to influence your customer to work with another lender. How stupid would that be?

[21] A requirement of neutrality in provider selection in these relationships might be ok under RESPA (even with the Reg. X definition) but surely would not be helpful to the customer or consistent with the professional duties of any settlement service provider to their customer.

[22] Anyone seeking to challenge HUD or CFPB RESPA interpretations has much better chances in the legal system today post Chevron deference/Loper Bright.