A federal court recently allowed a closely watched RESPA case brought by the Pennsylvania Attorney General to move forward, underscoring the continued scrutiny of affiliated business arrangements (“ABAs”) in the real estate industry. As discussed in our April 2025 alert, the lawsuit alleges that a group of affiliated mortgage, title and settlement service companies violated the Real Estate Settlement Procedures Act (“RESPA”) by providing ownership interests and other benefits to real estate professionals in exchange for referrals.

The defendants argued that their arrangements qualified for RESPA’s ABA exception. The court found, however, that the Commonwealth had adequately alleged facts suggesting that two critical ABA requirements were not met: (i) providing consumers with the required ABA disclosures and (ii) ensuring that owners received only a legitimate return on their ownership interests, rather than compensation based on referrals. The court did not determine that a RESPA violation occurred, but it concluded that the allegations were sufficient for the case to move forward.

Why This Matters
Affiliated mortgage, title and settlement companies remain common among builders, developers and real estate brokerages. This decision serves as a reminder that the ABA safe harbor is only available if its requirements are strictly followed.

Companies utilizing affiliated business arrangements should review whether:

• Consumers are receiving the required ABA disclosures and acknowledgments;
• Consumers are free to choose unaffiliated providers;
• Ownership interests are issued at fair market value;
• Distributions are based on ownership interests and not referral activity; and
• Marketing incentives, gifts, entertainment and similar benefits provided to referral sources are being carefully evaluated for RESPA compliance.

The Attorney General’s allegations focus on compliance with these fundamental ABA requirements, and the court’s decision demonstrates that regulators continue to scrutinize affiliated business arrangements that appear to blur the line between legitimate ownership interests and referral-based compensation.

For builders, developers, real estate brokers and settlement service providers with affiliated businesses, now is a good time to revisit ABA policies, disclosure practices and ownership structures to ensure ongoing compliance with RESPA. It is especially crucial that those engaged in ABAs include relevant language in their governing documents and agreements with purchasers that meet the criteria to be eligible for the ABA exemption. Having clear and appropriate language in these documents and agreements, coupled with business practices that are consistent with that language, can strengthen a company’s position when responding to regulatory scrutiny.

If you have any questions regarding your company’s affiliated business arrangements or compliance with RESPA, please reach out to partner Reilly Noetzel or any member of Barley Snyder’s Real Estate or Business practice groups.