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Bank Referral from Developer
Question: We have made a construction loan to a developer. The loan officer now wants to motivate the developer's customers to come to our bank for their mortgage loan. The lender wants to give a credit of $400 to the developer's customers who come to us for a mortgage. The developer would tell his customers about the discount from our bank.
Answer: Lenders may make arrangements to pay a premium or other reward paid to the borrower. The payment, discount or other benefit must not be related to any exchange of benefits between the two settlement service providers - your bank and the developer. If you can show that the benefit goes directly and only to the customer, it should be ok. The complication is that a referral is involved. Some might question whether the developer benefits from being able to promote a special mortgage deal for the customer. If there is any question, it may be better to avoid this idea.
Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 15, 12/05
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