The three safe-harbor conditions
- 1. Written disclosure of the affiliated relationship and an estimate of the affiliated provider’s charges, given to the consumer at or before the referral.
- 2. No required use — the consumer is free to shop and is never required to use the affiliated title company.
- 3. Bona fide return only — the only thing of value the owner receives (beyond the disclosure) is a return on the ownership interest, proportional to ownership and not tied to referrals.
The “bona fide” test — is it a real company?
Meeting the three conditions isn’t enough if the entity is a sham. Regulators weigh factors like whether the company:
- Is adequately capitalized for its business
- Has its own employees, office, and equipment (or pays fair market value for services)
- Performs core title services rather than just funneling orders
- Competes for business in the marketplace and bears real risk
- Receives referrals from sources other than its owners
A genuine joint venture is built to pass these factors — real staff, real operations, real risk.
What breaks the safe harbor
Requiring use, hiding the relationship, paying “distributions” that track referral volume instead of ownership, or running a shell with no real operations. Any of these turns a legal ABA into a Section 8 violation. See the myths that trip brokers up.
Checklist, not legal advice. Your structure and disclosures should be prepared and reviewed by qualified RESPA counsel.