One of our MLOs is talking to a title company and a realtor about each party offering a $200 credit to borrowers if they use all parties involved. The credit is to the benefit of the borrower, but I'm worried this would be considered a referral between all parties involved, thus causing a violation of section 8. Am I looking at this the right way? If we're only giving the credit to those who use a specific realtor and title company, we're giving something of value for using another service provider. I feel like this is pretty cut-and-dry that this is a violation, but since I'm about to tell someone something they don't want to hear, I want backup.

If the credits only benefit the borrower and do not offset some other cost for the other participants in the credit arrangement then I think it would probably be ok. You are right that the arrangement would constitute a referral but you need to establish that a thing of value is going to the person doing the referral for there to be an issue. For example, if you started paying the credit on behalf of the realtor or reimbursing the other parties then you are providing a thing of value to someone who is referring to you.

Outside of Section 8 though, you need to make sure the terms of this credit are explained and the credit actually happens.

Thank you. I'm concerned now because the credit being offered by us would potentially be wiped out with a higher rate. The MLO says they would disclose this up front and that a lower credit could be offered with a lower rate, but I'm not sure how that would be marketed in a way that would seem both a good thing for the borrower and not a UDAAP violation. Any thoughts?

OK - you have absolutely lost me. So the idea is that if the applicant uses all parties they get a credit and then you are going to hit them with a higher interest rate for that opportunity?? What they heck kind of an incentive is that?

Agreed. That is why I'm currently arguing with them about it. It makes no sense to me.