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#1529996 - 03/31/11 05:36 PM Loan Officer's Spouse is Realtor
Busy body Offline
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Registered: 11/09/04
Posts: 160
Loc: Texas
We have a new loan officer whose spouse is a realtor and send clients to the bank (her spouse). The realtor is paid the typical realtor commission at closing. I'm wondering if we have any potential for a Section 8 violation - or - if this is an affiliated business arrangement that is a violation if the realtor does not provide the affiliated business arrangement disclosure. If the latter, what would be the bank's responsibility? Or am I overthinking this?

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#1530060 - 03/31/11 09:24 PM Re: Loan Officer's Spouse is Realtor [Re: Busy body]
rlcarey Offline
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Posts: 64642
Loc: Galveston, TX
I would review the Bank's code of conduct, as any referral to the bank that ends up in that loan officer's lap is likely to present a real conflict of interest and begs for a lawsuit if something goes wrong and a claim of collusion is offered by the customer.
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#1530089 - 04/01/11 08:43 AM Re: Loan Officer's Spouse is Realtor [Re: rlcarey]
RR Joker Offline
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I agree. At a minimum, I would think any clients she sends to your FI should go to a different LO.
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#1530112 - 04/01/11 09:13 AM Re: Loan Officer's Spouse is Realtor [Re: RR Joker]
Busy body Offline
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Registered: 11/09/04
Posts: 160
Loc: Texas
Thanks to you both - and I agree. Could there also be RESPA concerns?

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#1530164 - 04/01/11 10:01 AM Re: Loan Officer's Spouse is Realtor [Re: Busy body]
rlcarey Offline
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Loc: Galveston, TX
As long as there is nothing of value exchanged for the referral, it should be OK from a RESPA standpoint. If these do go to the spouse's loan officer and the loan officer gets a commission, I guess you could stretch it to say that the realtor is also receiving something of value - maybe?
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#1530217 - 04/01/11 10:44 AM Re: Loan Officer's Spouse is Realtor [Re: rlcarey]
Dan Persfull Offline
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Registered: 08/28/02
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Loc: Bloomington, IN
I think it would be wise to revisit the AfBA disclosure requirements of 3500.15.

From the Real Estate Settlement Procedures Act, Section 2602 which is referred to by 3500.15(c):

(8) the term "associate" means one who has one or more of the following relationships with a person in a position to refer settlement business:

(A) a spouse, parent, or child of such person;

(B) a corporation or business entity that controls, is controlled by, or is under common control with such person;

(C) an employer, officer, director, partner, franchisor, or franchisee of such person; or

(D) anyone who has an agreement, arrangement, or understanding, with such person, the purpose or substantial effect of which is to enable the person in a position to refer settlement business to benefit financially from the referrals of such business.
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#1530224 - 04/01/11 10:48 AM Re: Loan Officer's Spouse is Realtor [Re: Dan Persfull]
Kathleen B Offline


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Even with the appropriate disclosure, this type of situation is best avoided due to appearance of impropriety even if everything is on the up and up. Many banks would not allow the lender to be involved in any deal referred by the spouse to avoid misperceptions and to limit the opportunities for funny business.
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#1530228 - 04/01/11 10:51 AM Re: Loan Officer's Spouse is Realtor [Re: Kathleen B]
Dan Persfull Offline
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Registered: 08/28/02
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Loc: Bloomington, IN
I agree 100% Kathleen but my point is due to the spousal relationship it would be MO the AfBA disclosure would be required regardless which loan officer processed the request.

It would also be MO if anyone from the bank referred someone to the Realtor they to would have to provide the AfBA disclosure. Technically any business referred to the Realtor benefits the spouse and by definition, as I read it, there is an associate relationship via the spousal relationship.


Edited by Dan Persfull (04/01/11 10:54 AM)
Edit Reason: Add additional comment.
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#1530842 - 04/01/11 04:34 PM Re: Loan Officer's Spouse is Realtor [Re: Dan Persfull]
Busy body Offline
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Registered: 11/09/04
Posts: 160
Loc: Texas
Thank you - I agree that as a minimum this doesn't pass the smell test. Dan, I also agree on the AfBA and went down that road as well. It threw me a little that the referral is from the realtor to the bank so the realtor would be the one giving the disclosure instead of the bank. So I would think we would want a copy of the disclosure - in the unlikely event management decided to allow this to continue.

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#1530954 - 04/01/11 09:58 PM Re: Loan Officer's Spouse is Realtor [Re: Dan Persfull]
Kathleen B Offline


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Originally Posted By: Dan Persfull
I agree 100% Kathleen but my point is due to the spousal relationship it would be MO the AfBA disclosure would be required regardless which loan officer processed the request.

It would also be MO if anyone from the bank referred someone to the Realtor they to would have to provide the AfBA disclosure. Technically any business referred to the Realtor benefits the spouse and by definition, as I read it, there is an associate relationship via the spousal relationship.

Agree 100% with you, Dan, re the need for the disclosure. My comment was meant to mean that even properly disclosed never ever let the related party handle any deals referred. Too cozy.
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Kathleen O. Blanchard, CRCM "Kaybee"
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#2142385 - 08/17/17 11:19 AM Re: Loan Officer's Spouse is Realtor [Re: Busy body]
JPC Offline
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Registered: 10/22/15
Posts: 673
I just posted this again in the Lending Compliance forum. Do you still think an AfBA would be needed in these situations? I think in the majority of cases it is going to be the Realtor that is making the referral to the LO, so is it the realtor that would need to provide the AfBA?

After reading the Reg further, I don't see how there is a affiliated relationship or an ownership interest, unless the individual real estate agent is basically their own company. Also, the LO as an individual would be making the referral not the lender, which again raises the issue of ownership interest and establishing an affiliate relationship with the realtor. If a different LO is used, then there would be no referral.

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#2142553 - 08/18/17 08:35 AM Re: Loan Officer's Spouse is Realtor [Re: Busy body]
John Burnett Offline

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IMHO, it's an ethics issue, and should be addressed in a bank's HR manual and employee handbooks and/or lending policy.
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#2142560 - 08/18/17 09:10 AM Re: Loan Officer's Spouse is Realtor [Re: John Burnett]
JPC Offline
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Registered: 10/22/15
Posts: 673
I agree, but, unfortunately, our company never really addressed the issue. I do think there are RESPA implications though for "things of value."

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#2142576 - 08/18/17 09:35 AM Re: Loan Officer's Spouse is Realtor [Re: Busy body]
rlcarey Offline
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Loc: Galveston, TX
our company never really addressed the issue.

Maybe it is high time they do.
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#2142654 - 08/18/17 12:24 PM Re: Loan Officer's Spouse is Realtor [Re: Busy body]
JPC Offline
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Registered: 10/22/15
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Yes, that is the next step. I am pushing to not allow it, but, we're a mortgage bank, so production runs the show.

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#2150746 - 10/21/17 12:31 AM Re: Loan Officer's Spouse is Realtor [Re: Busy body]
Inspector Offline
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Registered: 04/23/16
Posts: 85
I am having trouble tracking the reference down this time of night but if FHA loans are involved I believe there are restrictions on having family/business interests working multiple parts of a transaction.
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#2150813 - 10/23/17 12:02 PM Re: Loan Officer's Spouse is Realtor [Re: Busy body]
rlcarey Offline
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Registered: 07/16/01
Posts: 64642
Loc: Galveston, TX
I.A.3.(b)(v) Conflicts of Interest

Employees are prohibited from having multiple roles in a single FHA-insured transaction. Employees are prohibited from having multiple sources of compensation, either directly or indirectly, from a single FHA-insured transaction.
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#2158359 - 12/26/17 11:08 AM Re: Loan Officer's Spouse is Realtor [Re: Busy body]
JPC Offline
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Registered: 10/22/15
Posts: 673
Yes, if FHA there is a clear prohibition to stand on.

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