New
regulations,
enforcement
unlikely

When
asked
about
the
likelihood
of
new
federal
action
to
target
joint
ventures,
Bunting
was
direct.

“I
think
that
likelihood
is
pretty
low,”
she
said.
“Well,
let
me
say
it
two
different
ways:
I
think
the
likelihood
of
enforcement
at
the
federal
level
is
very
low.
There
may
be
a
possibility
of
changes
to
regulations
and
guidance
at
the
federal
level.”

Bunting
pointed
to
a
September
2024
white
paper
from
the


Mortgage
Bankers
Association
as
a
potential
catalyst
for

regulatory
shifts.

“They
outlined
a
number
of
recommended
reforms
as
it
relates
to
regulations
and
guidance
that
the
CFPB
has
that
relates
to
joint
ventures,”
she
said.
“And
given
the
sort
of
the
posture
of
the
current
administration,
it’s
more
likely
that
they
might
be
willing
to
consider
some
of
those
recommendations
to
make
the
regulatory
environment
and
the
guidance
that’s
available
more
up
to
date
from
a

technology
perspective
—
and
also
make
it
make
sense
to
consumers
from
a
disclosure
perspective.”

Davis
agreed
that
new,
sweeping
federal
regulations
are
unlikely
for
now.

“I
think
if
any
states
do
get
more
aggressive
in
their
scrutiny
of
affiliated
operations,
it
would
be
the
states
that
tend
to
be
more
aggressive
in
other
areas
of
financial
services
and
insurance
regulation,”
he
said.

“That
said,
I
think
we’re
entering
a
period
where
JVs
are
already
popping
up
in
many
states,
and
that
the
overall
atmosphere
will
be
pro-growth.”

Aftermath
of
D.C.
crackdown

Last
year,
major
enforcement
action
that
shook
the
industry
took
place
in
the
District
of
Columbia,
where
multiple
companies

entered
into
settlement
agreements
over
alleged
violations.

“I
think
after
those
settlements
came
out,
anyone
that
might
have
been
interested
in
entering
into
a
new
joint
venture
with
real
estate
agent
owners
in
D.C.
put
that
on
hold
and
or
abandoned
that
effort
altogether,”
Bunting
said.
“So
I
think
from
a
D.C.
perspective,
their
investigation
and
settlement
agreements
had
the
intended
effect.”

In
August
2024,
the

Office
of
the
Attorney
General
for
the
District
of
Columbia
(OAG)
tied
four
title
companies
to
alleged
unlawful
referral
practices.

The
firms
—

Allied
Title
&
Escrow
LLC,

KVS
Title
LLC,

Modern
Settlements
LLC
and

Union
Settlements
—
signed
on
to
pay
a
combined
total
of
more
than
$3.2
million
under
the
terms
of
the
agreement.

At
the
heart
of
the
OAG’s
case
were
joint
ventures
and
affiliated
business
arrangements
in
which

real
estate
agents
held
ownership
stakes
while
also
serving
as
referral
sources.

According
to
the
settlements,
the
companies
will
end
practices
that
provided
financial
incentives
to
agents
for
directing
title
business
their
way.
Additionally,
they
have
agreed
to
either
exit
the
D.C.
title
insurance
market
entirely
or
sever
the
ownership
ties
with
real
estate
professionals.

“A
real
estate
agent
referring
their
customer
to
a
JV
that
the
real
estate
agent
owns
may
be
inherently
illegal,”
Ehrlich
said.
“Perhaps
this
could
be
done
lawfully
under
RESPA,
but
it
would
be
very
difficult
to
do
that
lawfully
under
the
Consumer
Financial
Protection
Act,
which
generally
outlaws
conflicts
of
interest
like
this,
even
when
they
are
disclosed.

“So
while
there
are
certainly
some
bad
actors
out
there
who
are
trying
to
subvert
RESPA,
even
those
who
are
trying
to
comply
with
RESPA
may
be
acting
unlawfully
under
other
laws.”

Regional
impacts,
patchwork
future

Ripple
effects
of
last
year’s
enforcement
action
have
reached
further
than
the
nation’s
capital,
but
the
effects
have
been
uneven.

Bunting
explained
that
while
JV
formations
haven’t
halted
at
the
national
level,
companies
are
proceeding
more
cautiously.

“I
think
that
it
certainly
made
people
take
a
closer
look
nationwide
as
it
related
to
the
ventures
that
they
were
putting
together,
as
well
as
considering
state
law
in
those
other
locations
and
whether
that
could
have
an
impact
on
formation
of
a
joint
venture,”
she
said.
“But
I
don’t
think
that
the
D.C.
action
caused
people
to
stop
doing
them
in
other
locations
—
just
take
a
closer
look.

“There
are
still
brokerage-owned,
affiliated
title
entities
in
D.C.
But
I
think
the
the
formation
of
new
title
insurance
entities
that
are
owned
by
individual
real
estate
agents
who
are
also
producing
real
estate
brokers,
I
think
those
are
dead
for
a
bit,
unless
there’s
some
change
in
D.C.”

Davis
stressed
the
importance
of
preparation
in
establishing
a
JV,
including
securing
enough
capital
to
sustain
for
six
to
12
months
without
profit.

“You
need
to
be
serious
about
operating
in
a

compliant
fashion,
which
starts
with
having
good
resources
and
a
commitment
to
doing
things
the
right
way,”
he
said.
“And
you
need
to
be
positioned
and
willing
to
build
a
legitimate
title
operation
—
one
that
operates
like
any
traditional
title
operation
would,
and
which
could
stand
on
its
own
if
need
be.”

Operational
pitfalls:
Inherent
problems
or
human
error?

Some
critics
argue
that
joint
ventures
are
inherently
questionable,
but
Bunting
disagrees.

“There’s
always
bad
actors
that
you
know
will
speed
as
fast
as
they
possibly
can,
regardless
of
the
speed
limit,”
she
said.

Bunting
believes
most
violations
stem
not
from
the
concept
of
JVs
but
from
the
day-to-day
economic
pressures
of
running
them.

“Often,
folks
will
sort
of
pare
back
or

consolidate
or
find
ways
to
keep
a
business
afloat
but
trim
costs
where
they
can.
And
unfortunately,
sometimes
that
consolidation
in
the
trimming
can
present
compliance
challenges,”
she
said.

“So
I
just
think
that’s
the
reality
of
operating
the
joint
venture
is
you
have
to
be
incredibly
conscious
in
the
amount
of
work
that
the
joint
venture
can
generate
and
produce,
and
whether
or
not
that
will
allow
the
business
to,
in
fact,
be
compliant.”

Some
consumer
advocates
argue
that
JVs
exploit
the
anonymity
of
the
title
insurance
process.
Bunting
acknowledged
the
concern
but
highlighted
existing
legal
protections.

“The
law
does,
in
fact,
require
a
disclosure
in
an
attempt
to
make
the
consumer
aware
and
then
tell
them
explicitly
that
they
have
the
chance
to
go
shop
around,”
she
said.
“From
a
customer
service
perspective,
I
think
any
joint
venture
owners
would
tell
you
that
it
provides
a
seamless
experience
for
the
consumer.
They
work
together
better.”