My bank is looking at engaging a servicer to track the payment of taxes for properties securing our real estate loans. We will have the service performed for our existing portfolio of RE loans as well as for all new RE loans. The per loan cost for our existing portfolio is very small compared to the cost for new loans. Some of the pricing difference can be explained away by expected remaining loan life and other factors.

I am concerned that the pricing variance gives the appearance that we are receiving a discounted rate for our existing loans for the referral of new loans at a much higher rate (Sc. 8 violation).

If your bank uses such a service, how did you get a comfort level that the price paid for existing loans was not so low as to draw the attention of your examiners and/or HUD? What should I be looking at here, and/or documenting to cover my bank?

Is there an alternative to using this service to track the payment of real estate taxes for a bank of intermediate size that is spread over several states?

This came up with our examiners and the issue they focused on was the exclusive provider clause in the contract. They felt the discounted fee in exchange for exculsive use of the provider could be a section 8 problem. We struck the clause out by agreement with the provider and examiners were happy campers.