In order to stay competitive in the lending market, we are thinking of implementing builder credits. A builder refer a prospective buyer to our bank to get a loan and if the loan closes, the builder would get a credit.

Where should I start for guidance on what is acceptable and what is not acceptable?

Thanks!

Start with Section 8 of RESPA, and section 1024.14 of Regulation X. After reading paragraph 1024.14(b), you'll see that you can't give a builder credit for referring loan business your way.

Adding to what John said, from an old Kirchman manual.

Prohibition Against Kickbacks and Unearned Fees

RESPA makes it a felony ($10,000 fine and one year in prison) to give or accept any fee, kickback, or thing of value pursuant to any agreement or understanding for the referral of a real-estate settlement service or to receive any portion of the charge for a settlement service other than for services actually performed. The basic rule is that the referral of a settlement service is not a compensable act. If a referral fee or compensation of any kind is given for the referral of a settlement service, both the payor and the payee have violated the law (unless the payment falls within one of the exceptions). Thus, a lender may not pay a realtor for referring mortgage customers to it and a title company may not pay an employee of a lender (or the lender) for referring title business to it.

Soooo........this is actually a fashion preference.....how do your lenders and builders look in blaze orange?