Our consumer loan officers handling our indirect paper for home imporvement dealers are wanting to pay a finders fee. For mortgage secured loans, we would have the dealer make the loan at our "buy rate," but we would by it at a discount. (1.25% under buy rate) We also charge the customer our doc prep fee. The discount is not disclosed to the customer. The buy rate is greater than our HI mortgage secured rate in house. I say this is a referral fee and in violation of RESPA....of course I'm getting opposition. I'd appreciate opinions.

Actually I think you can work something out here. You can pay for “actual” work performed. The HI dealer will be taking and submitting the application (or I assume that’s the arrangement) so I think you could work out a reasonable and bona fide fee for this, I’m not sure if 1.25% would be reasonable, but it could be.

I do have a problem with the fee not being disclosed though. That’s a fee the borrower is paying and should be disclosed IMO.

I agree with Dan that you can be compensated for work, but I don't think that a percentage is ever "reasonable." Why is a $20,000 loan twice the work as a $10,000 loan? You would get twice the fee income, yet your work is the same. How is this reasonable?