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#200701 - 06/16/04 02:48 PM Affiliated Business Arrangement Form
Anonymous
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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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Lending Compliance
#200702 - 06/16/04 02:58 PM Re: Affiliated Business Arrangement Form
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
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.
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#200703 - 12/16/04 04:04 PM Re: Affiliated Business Arrangement Form
P*Q Offline

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As a follow-up, one of the Bank's closing attorneys is also one of our Board of Trustee members. He is one of 5 that we rotate our closings amongst. Is the AfBA disclosure needed only when we have him closing a loan because he happens to be next on the list? What about all of the other attorneys and appraisal companies? I've reviesed REPSA and am a tad confused. Thanks for any help you can provide.

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#200704 - 12/16/04 04:22 PM Re: Affiliated Business Arrangement Form
Beagles22 Offline
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State of confusion
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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#200705 - 12/16/04 05:05 PM Re: Affiliated Business Arrangement Form
P*Q Offline

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Beagles, same here. We've been using this atty. for a while and have never has the Afba form and have never been told we need to ny auditors or examiners.

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#200706 - 12/16/04 05:09 PM Re: Affiliated Business Arrangement Form
beaten blind Offline
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the Bat Cave
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
Anonymous
Unregistered

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
Beagles22 Offline
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State of confusion
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?
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#200709 - 12/16/04 07:00 PM Re: Affiliated Business Arrangement Form
beaten blind Offline
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the Bat Cave
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
Anonymous
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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
beaten blind Offline
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the Bat Cave
Good point! I'd forgotten that part...

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#200712 - 12/16/04 08:17 PM Re: Affiliated Business Arrangement Form
P*Q Offline

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I looked here and am very confused. This whole disclosure is talking about referring parties, etc. Our Board member is one of 5 closing attys that are in the regular rotation schedule, there's no referring going on. Plus, someone earlier said to state "has had a deposit account here in last 12 months" yet we disclose that on the GFE/Service Provider list. Today is the exit interview for S & S examiners so I'm a little fried, so you'll have to excuse my lack of understanding which is apparently basic.

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#200713 - 12/17/04 04:55 PM Re: Affiliated Business Arrangement Form
P*Q Offline

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bump?

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#200714 - 12/17/04 05:30 PM Re: Affiliated Business Arrangement Form
Dan Persfull Offline
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Bloomington, IN
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.
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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
Rob K Offline
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Rob K
Joined: May 2003
Posts: 165
Tennessee
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.
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Any comments, opinions, or views expressed are mine alone and do not necessarily represent the views of my employer.

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#200716 - 12/22/04 08:08 PM Re: AfBA timing - No cost
Sandra Offline
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Sandra
Joined: Jan 2003
Posts: 84
Massachusetts
According to Lucy Griffith we have to provide AfBA even if we pay fees. If we decide to use an attorney that is also on the BOD is it okay to provide the AfBA at closing?

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#200717 - 12/22/04 08:25 PM Re: AfBA timing - No cost
P*Q Offline

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Where I'm getting very confused is that we don't "refer" our customer to this particular closing atty. who happens to be a board member, we require the customer to use them. Still a Afba?

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#200718 - 12/22/04 08:30 PM Re: AfBA timing - No cost
GreatBlue Offline
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Colorado
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. "
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#200719 - 12/22/04 08:33 PM Re: AfBA timing - No cost
GreatBlue Offline
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Colorado
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.
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#200720 - 12/22/04 09:50 PM Re: AfBA timing - No cost
P*Q Offline

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GB, you are the best, thanks for clarifying! That's why I nominated you in the "best of" thread. Thanks again!

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#200721 - 12/29/04 09:38 PM Re: AfBA timing - No cost
P*Q Offline

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Actually, I thought I had it all wrapped up, one more question. Should be completing this form for all of our closing attorney's or just for the one atty. who happens to be a board member of the Bank. Sorry but I'm confused.

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#200722 - 12/29/04 10:08 PM Re: AfBA timing - No cost
Anonymous
Unregistered

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
GreatBlue Offline
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GreatBlue
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Colorado
Pizzaz, the AfBA form should just indicate the closing attorney with whom you have the relationship.
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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
Anonymous
Unregistered

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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#200725 - 01/03/05 08:26 PM Re: Affiliated Business Arrangement Form
P*Q Offline

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I finally get when I have to give it but now I'm concerned about timing. RESPA states at application, no later than the GFE. However, we often don't know until commitment letter goes out who the closing attorney is going to be so will we have a violation?

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