Answer:
If the realtor/loan officer refers business to his own bank in a RESPA-related transaction, then that referral is definitely governed by RESPA. This falls into the "Affiliated Business Arrangement" (24 CFR 3500.15). This section requires that whoever does the referring is to provide the consumer with an AFBA disclosure. Your loan officer meets the definition of an associate both by being an officer of the bank and the realtor. The bank itself would not be required to provide the AFBA disclosure unless it referred business to the realtor. Of course, he could refer business to himself, but that thought makes my head hurt.
One other potential pitfall is if that loan officer is involved in any way in the credit approval decision, including sitting on a committee that reviews and/or approves any of his loans. If so, you must be certain that he removes himself from the room during those discussions and that his absence is documented in the minutes. Does your financial institution have a conflict of interest policy? This type of related side line work is frequently prohibited or discouraged by most financial institutions. At minimum, this officer's involvement will raise an eyebrow or two with your regulators.
First published on BankersOnline.com 11/10/08
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