We are a state chartered bank and have a mortgage subsidiary (affiliate) in which the bank owns 51% in. My question is in regards to referal fees to bank employees. Management would like to suggest that for next 60 days that Bank pay referral fee of $200 per closed loan (for a purchase) and $150 for a closed loan (for a refinance) to any Bank employee. If someone comes into the bank and wants to do a home mortgage (whether it is a purchase or refinance), the employee would get that individual's contact information and the mortgage co. would contact them. If that lead to a closing, the bank employee would receive a referral fee paid from the Bank or Mortgage Co. (does it matter who pays for the fee?). Are there any RESPA issues with this? I know an affilaited business disclosure is given out at application for the bank and mortgage co.

The mortgage company cannot pay the fee and the mortgage company cannot in any fashion, manner or way reimburse the bank for the referral fee paid to the employee.



Since the mortgage company is the lender and not the bank the employee will have to give out the AfBA disclosure at the time of referral, not when an application is generated.

So would it be permissable if the fee came from the Bank instead of the mortgage company as long as the mortge co. doens't reimburse the Bank?

If that is okay, then I will have the bank employee give the AfBA disclosure at time of referral.

I tried finding (in plain english) the part of the reg that states all of this, but seems a bit unclear to me. Would you happen to have a reference to this?

For paying the fee refer to 3500.14(1)(g)(vii). Although the bank may own 51% of the mortgage company the employees working for the bank do not work for the mortgage company and the employees working for the mortgage company do not work for the bank. Therefore the bank can pay its employees and the mortgage company can pay their employees but they can't pay each other employees.

For the AfBA disclosure refer to 3500.15(b)(1). The last sentence.

Dan, thanks for your help, but just wanted to clarify.

So if a person walks into the Bank and wants a mortgage, we then give the AfBA disclosure to the person and have them fill it out and sign it (do we keep the orginal signed one and then they get a copy of it?). We then send the AfBA to the Mortgage Co. for them to contact the person? And if that results in a closing (purchase or refi) then the Bank can pay a small fee to the employee but the Mortgage Co. cannot pay or reimburse the Bank back. Is that correct?

This disclosure has to be completed by the employee and given to the consumer. It has to be separate from any other information the employee gives the consumer. I would provide 2 copies, one for the consumer to keep and one for our records to show their acknowledgment of receiving the disclosure.

The referral form you send to the mortgage company can be of your own design.



Correct.

Should the Bank or the Mortgage Co. retain the copy of the AfBA (record retention) or doesn't matter who has it?

The bank is making the referral and they are the ones required by regulation to provide the disclosure and they will have to document their compliance with that requirement.

Would your opinion change regarding this scenario:

Fully bank owned mortgage production office, located in same building as branch facility, employs mortgage originators- commission only paid bank employees; wish to pay incentive referral fees (tiered based on loan amount, maximum $100 for loan amounts $100,000 and greater) from his/her earned commission funds to all other bank employees-excluding mortgage center originators and Executive officers- for originated/closed loans.

Is this allowed under §3500.14?