Lenders have been smacked with Real Estate Settlement Procedures Act lawsuits this year, a long-time regulatory risk with marketing services agreements, but lenders shouldn't completely back off the advertising strategy.

MSAs help lenders extend their loan pipelines and build relationships with borrowers early, while providing realtors who don't have the resources to start their own mortgage business with lending products. But an experienced legal team and meticulous rule following are key to lenders staying out of trouble.

Marx Sterbcow, a mortgage industry compliance attorney, said 95% of the problems he's seen stem from a lender hiring the wrong attorney. 

"There's a handful of attorneys across the U.S. that know how to do these properly," he said. "Experienced legal help is critical. ... You just want to make sure that you have a compliance department, that it's not just the business people making these things up willy-nilly with no real oversight, or some rogue loan officer entering into these things with some real estate agent with no idea what they're doing."

Remote work has also made MSAs more challenging. Listings are more often to be private or not traditionally marketed, making the compliance around the value of the services more difficult to quantify, said Garth Graham, senior partner at STRATMOR Group.

LoanDepot was the latest lender to enter into an agreement, striking a deal with brokerage HomeSmart Monday. The connection brings loanDepot's suite of products, including refinance, Federal Housing Administration, Department of Veterans Affairs and home equity lending, to HomeSmart's network of more than 25,000 real estate agents.

"We believe strong relationships create better outcomes for homebuyers," loanDepot President of Retail Lending Tom Fiddler said. "By combining our lending expertise with HomeSmart's real estate leadership, we'll be able to deliver more financing options and a more seamless experience for buyers across the country."

Multiple large lenders have been partnered with brokerages over the past two years. Rocket acquired Redfin last year and Newrez announced its plans to form a joint venture with eXp Realty earlier this month. 

When Richard Cordray was director of the Consumer Financial Protection Bureau, MSAs were very closely examined, with several enforcement actions entered into. But the tactic was never declared to be illegal. Sterbcow had been warning about heightened enforcement since 2013.

Today's CFPB takes a different view of this activity.

Despite the legal hurdles, MSAs are still worth the work, particularly for smaller lenders looking to establish a market presence and larger lenders who have the necessary legal resources, Sterbcow said.

MSAs are also a useful relationship-building tool. 

"Sometimes, depending on what the service is, it might lead to a joint venture or somebody acquiring someone," said Ken Trepeta, executive director of the Real Estate Services Providers Council. "It's a way to develop those relationships in a more formal way, you get more business, and then you see where that goes."

Advice for lenders looking into MSAs

Sterbcow's biggest advice to lenders is to have their compliance department involved in these deals, and, more specifically, have someone from that team dedicated to overseeing MSA deals.

"The documentation is critical," he said, "but equally as critical is training, education and a policy and procedure piece that needs to be implemented for any lender."

Trepeta agreed that lenders should "do it by the book," and suggested brokers and real estate agents follow the National Association of Realtors' list of do's and don'ts for MSAs. He also advised lenders to approach these agreements with a relationship-first mindset, as opposed to strictly monetary value.