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#681970 - 02/07/07 06:12 PM In-house referrals
jap Offline
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jap
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A loan officer has asked if she could offer to buy any teller's lunch who send her a referral that results in an originated loan. Sounds like it would be an informal program, and would be limited to teller's at that location.

The LO would be buying the lunch...not the bank. Anyone else had anything like this going on? Any thoughts on the subject?
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#682006 - 02/07/07 06:43 PM Re: In-house referrals jap
Dan Persfull Online
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If these loans are subject to RESPA this would be a Sec. 8 violation. The tellers are employees of the bank, not the LO.
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#682409 - 02/07/07 11:07 PM Re: In-house referrals Dan Persfull
David Dickinson Offline
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§3500.14(g)(1)(vii) permits "An employer’s payment to it’s own employees for any referral activities". Therefore, the bank could buy the Teller's lunch.
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#682504 - 02/08/07 01:11 PM Re: In-house referrals David Dickinson
jap Offline
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But just to clarify, if these were non-RESPA loans (auto loans, for example) there would be no issue.
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#682573 - 02/08/07 02:32 PM Re: In-house referrals jap
David Dickinson Offline
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That's true. Outside of RESPA, we have free enterprise. However, RESPA only applies to consumer purpose, dwelling secured loans.
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#688277 - 02/16/07 02:07 PM Re: In-house referrals David Dickinson
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I am a little confused. . . So could a referral fee be paid to an employee for the referral of a closed mortgage loan?
Thanks.

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#688295 - 02/16/07 02:20 PM Re: In-house referrals Sugarbaker
Dan Persfull Online
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See 3500.14(g)(vii). The bank could pay the referral fee, but the loan officer could not. The employees are employees of the bank, not the loan officer.
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#702573 - 03/16/07 08:24 PM Re: In-house referrals Dan Persfull
Jan94 Offline
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I'm tagging on to this thread as I have a related question. I found an article in the InfoVault that discussed which bank employees can actually be compensated for referrals. It states that if a bank employee is involved in the lending process, they cannot be compensated in any way for making a referral. It further states that any bank staff that is involved in making a dwelling secured loan is not eligible to be compensated for referrals. The only bank employees that can be paid for a referral on a federally related mortgage loan would be tellers, non-lending platform staff and branch managers who do not take loan applications or make loans. This information was based on the October 1996 HUD rules. So if a loan officer refers a borrower to our insurance company for title insurance services, then that loan officer cannot receive a referral fee for doing so. Would that be correct?

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#702587 - 03/16/07 08:31 PM Re: In-house referrals Jan94
Dan Persfull Online
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Can you give a link to this article? Based on your summation I would have to disagree with it. A financial institution can pay their own employees for referrals. In your scenario the bank could pay the loan officer for the referral but the insurance company could not and the insurance company could not reimburse the bank in any form of compensation for the referral.
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#702597 - 03/16/07 08:42 PM Re: In-house referrals Dan Persfull
Jan94 Offline
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#702605 - 03/16/07 08:58 PM Re: In-house referrals Jan94
Dan Persfull Online
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The following appealed that ruling.

http://www.hud.gov/offices/hsg/sfh/res/fr970509.cfm
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#703064 - 03/19/07 06:19 PM Re: In-house referrals Dan Persfull
Jan94 Offline
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Dan - the document indicates that this was a "proposed" rule, has there been anything final? Also, in reading the amendment to 3500.14(x)(A)(3) it appears to indicate that a loan officer could be paid a referral fee as long as "the employee making the referral does not perform any other category of settlement service (including a service described in paragraph (b)(15) or (b)(16) of the definition of settlement service in Sec. 3500.2(b)) in the same transaction." But if a loan officer is originating a mortgage loan and performs "settlement services" and refers the borrower to our insurance affiliate for title insurance, isn't this saying the lender can not be paid for the referral since this is part of the "same transaction"?

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#703151 - 03/19/07 07:08 PM Re: In-house referrals Jan94
rlcarey Online
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A bank can pay their own employees what ever they want to based on anything they want to. Your affiliate cannot pay an employee of your bank a referral fee under any circumstances when you are talking about a RESPA covered transaction.
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#704085 - 03/21/07 02:43 PM Re: In-house referrals Jan94
Dutch Offline
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So just to clarify...A national bank is a wholly owned subsidiary of a bank holding company. A state licensed mortgage banker is also a wholly owned subsidiary of the same bank holding company. Bank refers mortgage applicants to affiliated mortgage banker. Mortgage banker keeps track of who has referred what. It is anticipated that some sort of prized or rewards will be provided to those bank branches that generate lots of referrals.

Based on what I have read, is it correct to say that if any sort of prize or reward is issued, it must be given by the BANK to any eligible BANK employees, and CANNOT be provided to a BANK employee by the AFFILIATED MORTGAGE BANKER. Please advise. Thank you!!

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#704393 - 03/21/07 06:10 PM Re: In-house referrals Dutch
Dan Persfull Online
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Quote:
Based on what I have read, is it correct to say that if any sort of prize or reward is issued, it must be given by the BANK to any eligible BANK employees, and CANNOT be provided to a BANK employee by the AFFILIATED MORTGAGE BANKER. Please advise. Thank you!!



You are correct. And the affiliated mortgage banker cannot in any form reimburse the bank.
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