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#613110 - 09/14/06 02:45 PM A little confused about referral fees?
ACBbank Offline
Power Poster
ACBbank
Joined: Jul 2006
Posts: 4,344
New York City
As the title says, I am a little confused on multiple areas of referral fees. According to Section 8 of RESPA, if I am understanding it correctly, a Bank is allowed to pay a "referral fee" to a a Residential Mortgage Broker as long as he fills out the application and actually does 5 listed items to "earn" his or her fee. Disclosure must also be provided. However, where I am somewhat confused is in the following:

1. Do the same rules/restrictions apply for a licensed commerical mortgage broker?

2. Is a bank able to pay a referral fee to another professional( for example a CPA or an attorney)for providing a commercial or residential referral?(I am assuming that the CPA or attorney actually helps close the loan). If so, does RESPA apply to only residential deals or both?

3. Finally, there seems to be a growing number of company's, at least in NY, that are not licensed mortgage borkers, that are referring loans( both residential and commercial) to Banks and recieving fees for them. I was under the assumption this is not allowed, but I know of numerous Banks conducting business this way. Is this legal,and if so, what restrictions apply?

All opinions will be helpful, but please indicate where(a link would be great) you drawing your opinions from.
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"100 victories in 100 battles isnt the most skillful. Subduing the other's military w/o battle is the most skillful." Sun-Tzu

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General Discussion
#613111 - 09/14/06 06:18 PM Re: A little confused about referral fees?
Title topics Offline
Junior Member
Joined: Aug 2006
Posts: 48
east coast
Check out Sec.2607 of title 12 Banks and Banking chapter 27 respa Prohibition against Kickbacks and unearned fee.
in short: No person shall give and no person shall accept anything of value unless actual services are rendered.: A referal is not a service: If the attorney prepairs a deed then he can be paid if he does the closing he can be paid if he tells his client to contact abcbank about the loan he needs and abcbank pays that attorney for doing the referal you are in violation..
as to 3. of your questions what they are doing is in violation of respa and should be turned in. You can not pay any form of value be it money or Giants and Jets tickets for a referal if it realates to a federally related mortgage and I would assume that you are doing FHA as well as Fannie and Freddie loans. If you take your customers to Maples in Westbury and have a night out on the town everyone seems to let that one go, but to flat out issue a check //// shame on you.
Title Topics does title and closings in all 50 states. and I have respa in front of me now.
These are my opinions and not legal advice however I did accurantly paraphrase respa.
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Title Topics is the owner of National Title and closing service and Is not offering legal advice.

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#613112 - 09/14/06 10:25 PM Re: A little confused about referral fees?
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,226
Galveston, TX
1. If it was a RESPA covered loan - they would still have to meet test. For non-RESPA related loans, it would depend on State law.

2. See above.

3. See above.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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