I'm not having any luck with "search" to find links to past threads that might answer this (obviously using the wrong key words).

In any event, managagement is developing a "special" HELOC program for customers referred to us by a third party first mortgage lender. We are offering a better rate and waiving closing costs to these customers.

Because the same perks are not available to walk-in customers, will this new program waive a fair lending flag? I can't see any prohibited basis that would trigger problems under the effects test. As for Section 8, there are no fees or anything of value being paid to the first mortgage lender for sending us the deals. Yes, just out of the goodness of their heart.

Are there fair lending or other issues I am missing? If we apply the special program pricing guidelines to this group of referred applicants in a consistent manner are we OK from the standpoint of fair lending?

Are they limiting their marketing to a particular type of client (only high income? etc.)? This would be the only flag I'd see. If you take all apps, low, mod, etc, as well as applications from all areas they serve I think you're ok.

If they only take applications from high income areas...just have your ducks in a row and make sure they are referring all apps, regardless of color etc.

As Dawnie pointed out, watch who the third party approaches. If they could be discouraging creditworthy applicants then you are on the hook with your program. I don't think there is naything to prevent you from proceeding, just be very careful and monitor closely the types of applicants they send to you.

Good advice...I can't answer these questions absolutely but will definitely be addressing them shortly. My understanding and expectation (not confirmed yet) is the referring mortgage lender accepts applications for their first mortgage products from all income and minority classes and geographies in the state, and some from adjacent states.

However, a few more questions have come up that have me back on the fence...(why is this hard?)

Would it be acceptable to ask the first lender to "preview" (I didn't say prescreen!) the applications they will or will not send us based on the location of the property but only to the extent the property is inside or nearby our assessment area?

If the referred applications are not screened for this, and assuming they will send us everything (at this point we are the only lender they're working with) is it an issue for us to sort these requests out and simply "not accept" the applications located way outside our lending area? It can be somewhat subjective, I know - but don't most banks do this on a case by case basis anyway? I'm hesitant to write this into our guidelines. How do other banks get around it? We would rather have the option to simply not accept and not process the application --- instead of processing it then turning around and mailing an adverse action letter with the sole reason "outside lending area." I don't know why this issue is so hard for me to get my arms around.

I'm also recommending to management we require the first lender obtain the customer's written authorization before forwarding an application and credit package, including an authorization for our bank to pull a credit report.

Thank you for your advice - these "arrangements" have a way of taking on a life of their own! One thing leads to another...leads to another...leads to another...