During a recent audit I have ran across a few loans to employees where the employee was not charged by the third party for services rendered. For example, on a refinance of their 1-4 personal property, they were not charged by the appraiser for the appraisal, they were not charged for the abstract, title search, etc. It seems as if all of the third parties waived these fees, there are even notes in file saying that the fee was waived. Would this be construed as an illegal kickback under RESPA?

Yes! I'm sure that it was based on the fact that the bank has thrown business their way.

If the circumstances are as you described, I agree with Randy 100%.

If, however, the third parties charged the bank and the BANK subsequently waived the fee (by eating it and not passing it on to the employee/borrower), you don't have an issue. Ideally, all the charges appear on the HUD-1 (if RESPA-applicable) as POC items.

Good point Bart - it does matter "who" waived the fees. The bank may absorb them as part of an employee perk, but in that case, it's important that they are properly disclosed on the HUD-1 as POC.

Thanks that is what I was worried about. So, going forward we tell all 3rd parties that they must charge us and not waive the fees. Then, if we wish to waive the fee as an employee perk and our consistent with all employees it would be ok.

One other consideration is, if these were insiders, you may also be looking at a violation of Regulation O.

Would this be a violation of Regulation O for executive officers?

I believe that it would be if it was not a standard employee benefit. It would be a loan made on more favorable terms than a loan made to a person not employed by the bank and not widely available to all employees.