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s the real estate industry grapples with regulatory uncertainty and economic challenges, joint ventures (JVs) between brokerages and title insurance companies remain under scrutiny. To gain insight into the current state of JV enforcement and what stakeholders can expect going forward, HousingWire spoke with three experts: Holly Spencer Bunting, a partner at Mayer Brown; Aaron Davis, CEO of the Florida Agency Network; and Jeff Ehrlich, a partner with McGuire Woods.
New federal regulations targeting JVs are unlikely in the near future. "The likelihood of enforcement at the federal level is very low," said Bunting. However, she noted that changes to regulations and guidance may be on the horizon, particularly if the Mortgage Bankers Association's September 2024 white paper recommendations are adopted.
Davis agreed that sweeping federal regulations are unlikely for now, but predicted a pro-growth atmosphere for JVs in many states. He attributed this to the increasing number of JV formations across the country.
Last year's enforcement action in Washington D.C. had a significant impact on the industry. The Office of the Attorney General tied four title companies to alleged unlawful referral practices and required them to pay over $3.2 million under settlement agreements. Bunting noted that the investigation and settlements likely deterred new JV formations in D.C.
Ehrlich pointed out that real estate agents referring customers to JVs they own may be inherently illegal, even if disclosed. He emphasized that conflicts of interest can be difficult to navigate, especially under the Consumer Financial Protection Act.
The effects of last year's enforcement action have been uneven across regions. While JV formations haven't halted nationwide, companies are proceeding more cautiously. Bunting noted that companies are taking a closer look at state laws and considering their impact on JV formation.
Davis stressed the importance of preparation in establishing a JV, including securing sufficient capital to sustain operations for six to 12 months without profit. He emphasized the need for good resources, a commitment to compliance, and a willingness to build a legitimate title operation.
Some critics argue that JVs are inherently questionable, but Bunting disagrees. She believes most violations stem from day-to-day economic pressures rather than the concept of JVs itself.
