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#200701 - 06/16/04 02:48 PM
Affiliated Business Arrangement Form
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Anonymous
Unregistered
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Our bank has a director who has their own insurance agency. Customers are able to choose who they want to provide home insurance. When customers ask who they should contact for insurance, we tell them phone numbers of agencies such as State Farm, American Family, etc.
I am running into a problem with the regulation where it says that an affiliated business arrangement is a situation where a BANK REFERS. We are not referring, but what if the customer ends up selecting our director's insurance agency?
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#200702 - 06/16/04 02:58 PM
Re: Affiliated Business Arrangement Form
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10K Club
Joined: Aug 2002
Posts: 47,886
Bloomington, IN
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IMO, each time you give a phone number you are "indirectly" referring business. You may not be referring to a specific person but you are referring your customers to these agencies/agents by providing their contact information. If your director's company is one of them then I'd be giving the AfBA disclosure.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#200704 - 12/16/04 04:22 PM
Re: Affiliated Business Arrangement Form
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Power Poster
Joined: Jan 2004
Posts: 3,626
State of confusion
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On the same note, I am looking at that form and we have on our board an attorney and he does all of our title opinions on loans that have an abstract. I have never seen the form until recently at a compliance school. I would like to start handing it out on all customers that have an abstract. He is also the attorney we order deeds from and I think we would need it in that case as well. I guess my main question is why have we never gotten in trouble for not using the form? He has been in this position for like 15 years. My boss is saying it's not necessary now because an examiner would have told us if it was. Any advice on that one? Thanks!!
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Going to church doesn't make you a christian any more that standing in your garage makes you a car.
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#200706 - 12/16/04 05:09 PM
Re: Affiliated Business Arrangement Form
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Gold Star
Joined: Oct 2003
Posts: 473
the Bat Cave
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Our attorney used for closing is a member of our Board. We have always given the Affiliated disclosure. It was expressly looked for by examiners (FDIC) during our recent Compliance Exam. If you are using them and they have a relationship such as described, you should be including the disclosure.
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#200707 - 12/16/04 06:45 PM
Re: Affiliated Business Arrangement Form
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Anonymous
Unregistered
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Our bank employee is an attorney and the bank collects the fee he charges for examining title work. The FDIC wanted to write us up because they said there was an affiliated business arangement and we weren't disclosing. We argued he was an employee and was no different than the loan person preparing loan documents. FDIC Washington agreed with us and took it out of the report. I highly doubt we would have won the disagreement if he wasn't our employee. You'll also never win the argument that "We were never written up in the past, so we must have been right all along". That won't fly! 
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#200708 - 12/16/04 06:58 PM
Re: Affiliated Business Arrangement Form
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Power Poster
Joined: Jan 2004
Posts: 3,626
State of confusion
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OK so I am now trying to fill out the form to show my boss what it would say. Ours says the nature of the relationship between us and them is..... The owner of the law firm is our Chairman of the Board. Is that what I put there?
_________________________
Going to church doesn't make you a christian any more that standing in your garage makes you a car.
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#200709 - 12/16/04 07:00 PM
Re: Affiliated Business Arrangement Form
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Gold Star
Joined: Oct 2003
Posts: 473
the Bat Cave
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Ours names the attorney and indicates that he is a member of the bank's Board of Directors as well as bank counsel.
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#200710 - 12/16/04 07:03 PM
Re: Affiliated Business Arrangement Form
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Anonymous
Unregistered
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....and probably "has had a deposit and or loan relationship with the bank during the previous 12 months."
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#200711 - 12/16/04 07:05 PM
Re: Affiliated Business Arrangement Form
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Gold Star
Joined: Oct 2003
Posts: 473
the Bat Cave
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Good point! I'd forgotten that part...
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#200713 - 12/17/04 04:55 PM
Re: Affiliated Business Arrangement Form
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Power Poster
Joined: May 2001
Posts: 8,458
Somewhere
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#200714 - 12/17/04 05:30 PM
Re: Affiliated Business Arrangement Form
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10K Club
Joined: Aug 2002
Posts: 47,886
Bloomington, IN
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You will find Lucy Griffin's comments interesting in this thread . The deposit accunt in the last 12 months is a requirement for the GFE for a particular provider.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#200715 - 12/17/04 11:02 PM
Re: Affiliated Business Arrangement Form
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100 Club
Joined: May 2003
Posts: 165
Tennessee
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We provide the disclosure on every mortgage loan because of referrals frequently made for hazard and title insurance to agencies jointly owned by the bank and one of our directors.
_________________________
Any comments, opinions, or views expressed are mine alone and do not necessarily represent the views of my employer.
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#200718 - 12/22/04 08:30 PM
Re: AfBA timing - No cost
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Diamond Poster
Joined: Feb 2003
Posts: 2,362
Colorado
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Pizzaz, if you look at the definition of "referral" from 3500.14(f), you'll see that it includes requiring the use of a particular service provider.
"(f) Referral--(1) A referral includes any oral or written action directed to a person which has the effect of affirmatively influencing the selection by any person of a provider of a settlement service or business incident to or part of a settlement service when such person will pay for such settlement service or business incident thereto or pay a charge attributable in whole or in part to such settlement service or business. (2) A referral also occurs whenever a person paying for a settlement service or business incident thereto is required to use (see § 3500.2, "required use") a particular provider of a settlement service or business incident thereto. "
_________________________
Opinions are mine and not necessarily my employer's.
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#200719 - 12/22/04 08:33 PM
Re: AfBA timing - No cost
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Diamond Poster
Joined: Feb 2003
Posts: 2,362
Colorado
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Sandra, the AfBA has to be given at application when you are requiring use, and no later than the time of referral otherwise. I don't see how this could ever be as late as loan closing.
_________________________
Opinions are mine and not necessarily my employer's.
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#200722 - 12/29/04 10:08 PM
Re: AfBA timing - No cost
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Anonymous
Unregistered
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If the bank has both a mortgage "department" and an insurance "department" and the mortgage department advises the mortgage applicant that insurance may be purchased through the insurance "department" must an AfBA disclosure be given since both are a "departments" of the bank?
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#200723 - 12/29/04 10:26 PM
Re: AfBA timing - No cost
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Diamond Poster
Joined: Feb 2003
Posts: 2,362
Colorado
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Pizzaz, the AfBA form should just indicate the closing attorney with whom you have the relationship.
_________________________
Opinions are mine and not necessarily my employer's.
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#200724 - 01/03/05 08:03 PM
Re: Affiliated Business Arrangement Form
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Anonymous
Unregistered
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In spite of FDIC's ok, I would remain leery of the road they seem to have cleared for you. My experience as an employer in this kind of situation leads me to conclude that the issue turns on whether the employee is truly an employee or a sub-contractor (the w-2 vs. 1099 dispute). The existence of a fee tends to move him from the employee to the sub-contractor category. The fact that the Feds have removed one roadblock does not obligate them to keep the road clear in the future. Hope this is a useful caution. regards,
Jonathan
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