Social Media Compliance Best Practices for Lenders

Social Media Compliance Best Practices for Lenders

Social media platforms are some of the most powerful means to generate leads and further brand awareness, but it’s also incredibly risky for mortgage lenders in today’s regulatory environment.

The mortgage industry has been under pressure from regulators to stay within the boundaries of the Real Estate Settlement Procedures Act (RESPA). However, it hasn't always been clear how to navigate such a landscape. As social media platforms have been added to the mix, a greater sense of ambiguity surfaced too.

Mortgage companies and their compliance departments often feel a great deal of anxiety meeting all of these standards, and that’s largely in part because of the potential losses that could come from being (or not being) engaged in marketing practices, like social media.

Some mortgage brokers depend on their LinkedIn networks to find Realtor® partners, while loan officers establish personalized connections with clients through Facebook and Twitter.

Nobody wants to cross the line and risk their business, or their partner's, but all the same, staying active on social media is one of the best ways to reach new clients.

This guide walks you through best practices to bear in mind when cultivating social media strategies for your mortgage business.

Social Media for Lenders: What to Avoid, What’s Acceptable

Mitch Kider, chairman and managing partner with Weiner Brodsky Kider PC, is an attorney and author living in Washington, D.C. For the last 40 years, Kider has been engaged in housing policy and continues his career today in a nationally recognized law firm, representing financial institutions, residential homebuilders, and real estate settlement service providers.

He spoke with Total Expert CEO Joe Welu in a webinar broadcast about some of the mistakes made by mortgage lenders when co-marketing. Included in the conversation was insight on how mortgage professionals and real estate agents can approach social media.

“Social media is an area that we’re all still figuring our way through, and that’s regulators and as the industry as a whole,” Kider said.

However, to give some foundation, Kider explained that social media is considered an advertisement, which means loan officers and agents must also abide by advertising regulations along with RESPA.

"It's a dangerous area right now, just because of how regulators are starting to look at it,” he said.

In particular, you want to stay cautious around likes and shares, because those actions can be seen as a thing of value, an endorsement or a referral. “Sharing information is fine,” Kider said, affirming that industry news and relevant information is okay to share, generally.

Kider continually brought the conversation around to how certain actions could be seen by both regulators and consumers.

This is helpful for lenders to recall when engaging with others on social media, including both partners and potential clients, to act as a mental guideline for navigating this public space whether directly or indirectly.


Advertising Campaigns On Social Media

Since social media platforms are seen as a type of advertisement, specific regulations and best practices come along too.

From a RESPA standpoint, lenders and real estate agencies must be diligent in their understanding of what acceptable business practices are when it comes to advertising on different social media accounts.

Kider gave a hypothetical situation. What if a mortgage broker wanted to invite an agent to advertise on Facebook?

While a seemingly common practice, where that gets risky is that consumers could perceive the advertisement as being an endorsement, becoming "problematic" from a compliance point of view, Kider explained.

To help reduce the risk of breaching compliance, there are particular ways to deploy your advertising campaigns.

For instance, Kider said social media advertising campaigns should be aimed at the general public, instead of at your Realtor® partner's clients. This way, you’re working to keep campaigns separate and clear to the consumer, which should be a common theme throughout your advertising practices.

Here’s a list of social media best practices:

  • Don't endorse your partner. It could be seen as a referral.

  • Stay away from exclusive advertising agreements.

  • Make sure that everything is accounted for. When it comes time for payment, you must pay fair market value for services actually performed.

  • At payment time, remember that defraying costs violates section 8. Everything must be paid for on a pro rata basis.

  • Throughout your advertising campaigns, you want to remain as transparent as possible. State your intentions, and make it clear to consumers what they’re looking at with this label: “Advertisement.”

Engraving these best practices into your policies and procedures, you could be reducing the likelihood of a section 8 violation, potentially saving your mortgage business from serious damages, both monetarily and reputably.

 

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