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#38684 - 10/24/02 05:02 PM Web Links
Anonymous
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We have had a request add a link site for a home builder. Is there a RESPA issue with this.

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eBanking / Technology
#38685 - 10/24/02 05:11 PM Re: Web Links
Andy_Z Offline
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The answer is, we don't know and how much risk will you take.

I asked this of the OCC and they said HUD has to make the call. I'm waiting.... I haven't heard of anyone getting into trouble on it, but here are some points I asked and my thoughts.

Is the link a thing of value? Likely yes. Could be a problem but many regulators (not rule makers) seem to think this will not be a huge issue in practical application. The letter of the law may differ, however.

What if there is a reciprocal link between each site, is it a marketing exception? Could be.

What if one site has 100M hits per month and the other has 100? Maybe the marketing exception isn't so reciprocal.
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#38686 - 10/24/02 08:20 PM Re: Web Links
Richard Insley Offline
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Toano, VA
Yes this is a Section 8 issue. As you decide whether to add builder or realtor links to your site, ask yourself: how do I look in stripes? Section 8 carries criminal penalties of up to one year in jail. Do the potential benefits warrant a risk of this magnitude? Do you trust HUD to interpret RESPA favorably?
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#38687 - 10/28/02 04:10 PM Re: Web Links
RVFlyboy Offline
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Richard, I agree that the potential penalties are severe for Section 8 violations. But I also think Andy is right too - part of the risk assessment equation is also assessing the likelihood that a penalty will be imposed. And when I'm considering putting a link for a home builder on my bank website, I would not consider the likelihood of spending one year in jail to be very high. In fact, I'd consider that likelihood to be almost nonexistent. Possible? Yes. Likely? No. I think that Andy has mentioned some ways to possibly address this that, although they do not eliminate the risk, they at least mitigate the risk maybe even to a level that would be acceptable to the institution trying to find a risk/reward balance point.

The other thing to consider here is that the link would only be a violation if it is a thing of value provided in exchange for the referral of settlement service. There are many possible scenarios where the builder could ask for the link and not be in danger of violating Section 8 at all. For instance, suppose the builder routinely keeps a million dollars on deposit with the bank in various accounts and has two million dollars in outstanding commercial lines of credit and asks for a link on the bank's website in exchange for being such a good commercial customer. No Section 8 violation there. It's only a Section 8 violation when the builder asks or implies that if the bank provides the link the builder will refer customers to the bank.
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#38688 - 10/28/02 07:54 PM Re: Web Links
Richard Insley Offline
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Toano, VA
Jim- You are right, of course, but where's the value to the bank that would induce me to risk a violation with unacceptable consequences? Another risk we haven't mentioned is my reputation in the eyes of examiners. Will a Section 8 violation cause a downgrade in my compliance rating? While the customer may have a megabuck relationship & the links have nothing to do with referrals, I'll have to convince a skeptical examiner (and maybe HUD). I still don't see enough value to make me want to waste the time & resources & create the risks.
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