Mortgage Referral Fees

Question:

The Pres/CEO of one of our banks wants to commence referring commercial real estate loans (in excess of $10,000,000) or loans that they cannot provide the desired structure to a mortgage company (which happens to be a "Large" client of the bank) and in turn the bank would receive a "referral fee" for those referrals that result in a closing. The CEO says no problem (not consumer deals), but I am hesitant to go along with. Any advice??

Answer:

RESPA prohibits "The payment and receipt of a fee or thing of value in return for the referral of settlement service business for a federally related mortgage loan." It sounds like the loans you described will not be subject to RESPA, however. I am not aware of any other similar prohibition to prevent the situation you describe. Be careful, however, that this arrangement doesn't cross over to RESPA covered loans.

First published on BankersOnline.com 1/20/03