We have a builder who wnats to refer his customers to us for HEL, HELOC and Construction loans. We would give each customer a discount from our normal rates. Nothing goes to the builder. I think we should disclose the relationship to the borrower but I am missing other issue say w/ Respa, etc.

Think about GLBA.

I think you will have serious problems with RESPA if you give this builder's applicants discounts that you do not offer to the rest of your customers, because this is like you are giving money to the builder.

Thanks Suwannee - Why is it like giving money to the builder? I asked the question because something in my mind seems to say we could have problems w/ such a program but I can't put my finger on it. It just seems like too much of a win-win for the bank and customer but not the builder. Can you be more specific on what you mean or where I can read?

I don't see where this is giving money to the builder either, and I don't think this raises any RESPA issues. The builder is referring business, but I don't see how he is getting anything of value in exchange. You want to be sure there's no back-end compensation of the builder for these referrals, such as discounts on the loans he gets from you.

You also may want to consider any potential fair lending issues if the builder's customers are predominately of one race.

I would look at this program very closely and ask specifically why the builder is willing to do this. We had the same interest at our bank, and when that question was asked the response was because "we would give the builder a preferred loan rate on their construction loans for the business"....which is a thing of value.

From what I've been told - he is looking for a lender hat can make the decision locally so his customers can get a quick response on the loan. Our only relationship w/ this person is that we have his business deposit accounts. No loan relationships.

I consider it to be like giving money to the builder because you are lowering the rate for the purchasers of his homes, making it easier for people to qualify for the loans to purchase his homes, therefore raising more revenue for him. I realize this is a conservative view, however, this is the way I look at it. If the builder wants lower rates, let him buy down the rate.