If a Director provides RESPA settlement services, do we need to provide the Affiliated Business Arrangement Disclosure to every mortgage applicant?

Question:

We were recently advised at the bank, where I am employed, that we must use the Affiliated Business Disclosure on every residential mortgage that we do. We are located in a small town where the majority of the customers we have choose to use the local attorney. I specify choose. Upon an examine we were told that it looked like we were making the customers use this particular attorney and that we had to give the Affiliated Disclosure on each an every mortgage because one of the attorneys is a board of director for our Holding company. Now, since we are doing this and a customer has chosen another attorney, it looks like we are soliciting for the local attorney. Do we indeed have to give this to every mortgage customer?

Answer:

The Director is definitely an affiliate that provides RESPA settlement services, but unless you make a referral, you do not need to provide the Affiliated Business Arrangement Disclosure.

24 CFR 3500.15 defines an "affiliated business arrangement" as a situation where:

(1) a bank refers settlement services on a RESPA covered loan to a provider which is either an affiliate of the bank or which is owned (> or = 1% ownership interest) by the bank, and

(2) the bank directly or indirectly refers settlement services to that provider or affirmatively influences customers to select that provider.

First published on BankersOnline.com 11/18/02