There is an independent, unaffiliated realtor who would like to rent a desk at one of our mortgage loan production offices. Are there any compliance issues to be considered.

Sure there are, like making sure that Section 8 issues do not crop up. Also, why would you do this. What is in it for the bank besides the couple of bucks a month for renting desk space?

Information security and privacy issues come to mind.
How will you insure that the LPO employees do not speak about customer's applications and/or loans within earshot of the realtor?
How will you insure that the realtor will not see any records which contain applicants' financial information?
Where will the LPO employees place confidential information (whether relating to an applicant or your employer) which needs to be destroyed without the realtor having access to the information?
Will the realtor be allowed to bring his/her clients into the LPO for meetings (which only increases information security and privacy risks)?
Will the realtor have access to the LPO office when no LPO employees are present?
Will LPO employees place records with confidential information in locked cabinets when they are away from their desks?
Will the realtor be allowed to store his/her records (including records with his/her clients' confidential information) at the LPO office? If yes, will you provide a spearate destruction bin for the realtor? Will the LPO employees be informed not to acess the realtors' records?
What is your communication plan to all LPO employees about these issues?

How many more questions need to be asked before you see what a bad idea this is and nothing good will come from it?

Can we switch this question up and go the other way with it? What if our MLO has an opportunity to rent space from a local realtor? We have obtained comps and the price of this rental is generally below what normal "office space" could be leased for - however, the traffic generated would probably only come from clients of the realtor. I understand the privacy concerns and agree they are something we must consider. Could someone please expand upon the RESPA Section 8 concerns that would exist. The ONLY payments between the realtor and the bank(MLO) would be for the leased space.

Thanks!

Your concern will be demonstrating with hard numbers that the rent for the leased space is a market rent. You must do that.

If the rent is below market for comparable space, the logical assumption could be that the realtor has reduced the rent (a thing of value) in exchange for more favorable financing treatment of the realtor's clients. The aspect of that treatment that's more favorable might be as intangible as easier access to financing.

Kathleen, I have a proposal for 3 different rental spaces in the same area. The amount we will pay for our lease of space to the realty group is below the amount listed in the proposal we received for the 3 other spaces. I guess my question would be - if we are paying less for rental space than we would elsewhere, and no other payments of any nature are being made to the realty group - where would be the customer harm for a Section 8 violation? I could argue that traffic would likely only come from clients of the realtor, therefore this space is not as valuable as true office space which would allow for a greater traffic flow.

John, the majority of the loans are sold on the secondary market and must meet investor guidelines. Those retained in-house must meet QM standards. All borrowers are treated the same, so it would not provide an opportunity for more favorable financing. Does that reduce the RESPA Section 8 concern?

I'll wait and see what Kaybee offers on this question.

Just make sure that all compliance issues are addressed - well beyond Section 8 issues. I.E., what impacts will this have on the bank and what approvals are necessary to be obtained if this office is deemed an LPO under your Federal or State regulator.

Re the rent, make sure you have a valid explanation and can back it up why the other proposal is a below market rate. It doesn't necessarily have anything to do with harm to a consumer.

I had a situation very similar to this pop up at a bank that I was working for. It is not apples to apples but some of the risks were the same. I contacted my local FDIC office to get their opinion. With our situation, they were not concerned with section 8. But I could see this situation being much more of a section 8 concern. But they were very worried about privacy.