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#2103899 - 10/20/16 04:44 PM Section 8 Question
Lea Scott, CRCM, CAMS Offline
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Joined: Dec 2015
Posts: 92
Marketing is considering offering a reduced rate on a mortgage for a "famous personality." In return for the reduced rate, the "famous personality (think pro ball player)" would publicly endorse our bank. Thoughts? Thank you.

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RESPA
#2103902 - 10/20/16 04:49 PM Re: Section 8 Question Lea Scott, CRCM, CAMS
TMatt87 Offline
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TMatt87
Joined: May 2011
Posts: 1,984
Idaho
It would be more of a fair lending concern than a section 8 issue. A borrower isn't a settlement service provider, so section 8 doesn't apply.

Why not just charge him normal rates and then pay him for his endorsement? That way you avoid fair lending hassles as well.
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#2104017 - 10/21/16 05:23 AM Re: Section 8 Question TMatt87
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TMatt, while I agree with your solution to just pay for the celebrity endorsement I am not sure I agree with the assessment that this is not a Section 8 concern.

Although the customer is not a settlement service provider the bank is providing a settlement service and therefore cannot provide a thing of value for referrals. If the celebrity is to provide referrals to the bank in exchange for a lower rate that would be a Section 8 issue.

With that said, I could see an argument that "it's just payment for marketing" and not a referral but if that's the case it's safer and transparent (and honest?) to just pay market rate for an endorsement.
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#2104097 - 10/21/16 05:16 PM Re: Section 8 Question Lea Scott, CRCM, CAMS
TMatt87 Offline
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TMatt87
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Celebrity endorsements are not referrals, IMO. Would you consider Alex Trebek a referral source for whatever that reverse mortgage company is that he does commercials for?
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#2104140 - 10/21/16 07:08 PM Re: Section 8 Question Lea Scott, CRCM, CAMS
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
A borrower isn't a settlement service provider, so section 8 doesn't apply.

I do not agree with the bolded statement. The lender can not give the borrower a thing of value in anticipation of referrals from the borrower.


As for Trebek he's a paid spokesperson for the marketing of the product; and so should be the borrower in question. There should also be a formal contract between the borrower and the bank for such an arrangement.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2104155 - 10/21/16 07:52 PM Re: Section 8 Question Lea Scott, CRCM, CAMS
Docs Offline
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Joined: May 2016
Posts: 241
I agree with Dan.

I believe an accurate distinction to make is that Section 8 would not apply when a lender offers the borrower an inducement in order to get his/her loan personal loan business (lower rate, lower fees, etc., etc.), but the fair lending aspect must still be considered. If the borrower is being compensated (with a cheap loan or otherwise) for referring others that is a different situation and would be covered by Section 8.

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#2104176 - 10/21/16 09:34 PM Re: Section 8 Question Lea Scott, CRCM, CAMS
TMatt87 Offline
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TMatt87
Joined: May 2011
Posts: 1,984
Idaho
Reading through Section 8 again, I agree. This is the statement that steered me astray:

"When a person in a position to refer settlement service business, such as an attorney, mortgage lender, real estate broker or agent, or developer or builder... "

That, and the fact that all the examples in Appendix B revolve around settlement service providers led me to believe only settlement service providers were affected by Section 8.

However these lists are illustrative and not exclusive.


I do still stand by my position that the OPs question really isn't a Section 8 issue as a celebrity endorsement isn't a referral, IMO.
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