My bank employs people who work with potential borrowers to compile an application, analyze credit, and essentially do all of the functions that a mortgage broker would do, but we don;t actually originate the loans. We have arrangements with a few lenders that we will get a fee from the lender if the loan closes.

Regulators are having a problem with this as being a violation of RESPA. Not sure why, as we are performing significant services for the borrower in connection with the origination of the loan.

They are also having problems because we pay employees to do this work but do make a profit.


Thoughts?

Well, you are either a broker or you are not and either you are earning the fee that you are getting or you are not. If they are getting ready to cite you for a Section 8 violation, that can be rather serious. I suggest (as you should have probably done long ago prior to beginning this process) get legal counsel involved.

We have been doing it for 3 years and the regulators never had a problem with it. Now, with the refi boom, they are saying it is "too profitable" for us, relative to what we pay to our employees who do the work. Bizarre. Thanks for your earlier reply.

That that might be where the rub is. Your fees for providing the services that you do has be reasonable. If you are getting $2,000 on a loan and it takes an employee making $10 an hour eights hours to do it, then that might be the issue they are looking at.

1024.14(g)(2)The Bureau may investigate high prices to see if they are the result of a referral fee or a split of a fee. If the payment of a thing of value bears no reasonable relationship to the market value of the goods or services provided, then the excess is not for services or goods actually performed or provided. These facts may be used as evidence of a violation of section 8 and may serve as a basis for a RESPA investigation. High prices standing alone are not proof of a RESPA violation. The value of a referral ( i.e., the value of any additional business obtained thereby) is not to be taken into account in determining whether the payment exceeds the reasonable value of such goods, facilities or services. The fact that the transfer of the thing of value does not result in an increase in any charge made by the person giving the thing of value is irrelevant in determining whether the act is prohibited.