We are interested in referring customers to an affiliate who will process, underwrite and close mortgage loans in their name. Our bank would receive a referral fee for referring the customer. Is this a violation of RESPA?

Yup. Perform no service - receive no fee.

Thanks! This is exactly what I was thinking!

Refer to FIL-21-99, March 12, 1999 – HUD Policy Statement on Lender Payments to Mortgage Brokers. To determine whether compensable services are performed, HUD has established the following list of 14 services that are normally performed in loan originations:

Completing the Borrower’s Application
Analyzing the Borrower’s Income and Debt
Educating the Borrower on the Home Buying and Financing Process
Collecting Financial Information
Ordering Verification of Employment and Deposits
Ordering Mortgage Loan Verifications
Ordering Appraisals
Ordering Inspections or Engineering Reports
Providing Various Required Disclosures
Counseling the Borrower Concerning Credit Problems
Maintaining Contact With Various Parties to the Process
Ordering Legal Documents
Determining Flood Zone Coverage
Participating in the Loan Closing

You can qualify for compensation, if you take the application information and perform at least five additional services.

*Performing only “counseling-type” activities will be subject to greater scrutiny.

In the above post by David Dickinson would the referring bank need to document and monitor how the 5 of the 14 services were established for an FDIC audit other than the settlement procedures checklist?
The loan partner who we refer loans to processes, underwrites and prepares closing documents in their name as well as disburses all funds.
We receive compensation once the loan partner receives our real estate settlement procedures checklist statement.

Also RESPA: Section 8 How are banks establishing that they gave meaningful counseling rather than steering has taken place to satisfied the following occur: â—¾counseling gave the borrower the opportunity to consider products from at least three different lenders?

Broker arrangements are pretty complex and very fact specific. It is hard to answer other than in generalities. Any broker arrangement should be memorialized in a contract/agreement that specifically outlines the duties and responsibilities of the broker and the lender and address the compensation issue, including what happens in a transaction that gets screwed up in the middle of the process. I would recommend sitting down with an attorney that is more than competent in RESPA compliance.

Thank you!

We receive an origination fee once the loan has closed and we submit the settlement procedures checklist to our secondary market lender. If we are only the referring bank do we need to satisfy meaningful counseling has taken place? thoughts