Situation: High-end subdivison lots being offered to consumers by the owner/developer. The developer provides a consumer loan application form to the consumer. The consumer brings the completed application to the owner/developer whom forwards the application to one of two banks. There is not an agreement with the owner/developer- not a "dealer" relationship or indirect lending and no fee paid to the owner. The bank makes the credit decision and handles the consumer as any other potential loan customer. Would this situation have any specific compliance issues (other than Reg B changes)? Would this type of situation prevent the consumer from exercising his right to "shop" for credit?

Why is the developer directly involved? I would look toward your state laws and see if these actions make them a mortgage broker? I would have a dealer/broker type agreement in place for any third party submitting applications to make sure that if you communicate information back to the developer regarding the customer it doesn't make you a CRA, among other risks.

This is my take on it and I am not an expert as I too have had steering questions this morning!!

As long as the owner/developer does not mandate that the prospective buyers use one of the two banks he is sending apps to, I don't see how this could be considered a hinderance to the buyer.

Suzie - I agree from a RESPA standpoint, but there are a number of other regulatory implications when an actual application passes through the hands of the third party before it gets to you.

The application is to purchase the vacant land. Would this change your opinion?

LCoyle

Vacant land would take any aspect of RESPA out of the picture, but not my concerns regarding accepting applications from the third party.

Thank you for your assistance.

If the application for vacant-land is covered by RESPA by the fact a structure will be constructed within two years; which application form should be used- consumer closed-end secured or 1003?

LCoyle

Is the structure going to be constructed with the use of the proceed of this particular loan???

No, the land is only being purchased.

Lcoyle

Then RESPA would not apply.