Referral Frustration

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Question:

Bank A and Mortgage Company B are owned by the same holding company. Bank A has an incentive plan where the employee of Bank A can make a referral to B and A's employee will be paid for that referral. It is paid from A's payroll account, however, A gets the money from the salary of B's originator. There are no affiliated disclosures given at any time during this process. I have read Sections 3500.14 and 15, and have thought so much that I can't think straight about the subject. What are your thoughts?

Answer:

Get measured for your orange suit, you are in violation of Section 8 of RESPA in my opinion. Bank A may pay its own employees for the referral, but Mortgage Company B cannot pay Bank A's employees, nor can they reimburse Bank A for the referral fee directly or indirectly. You are also violating section 3500.15 of HUD's Reg X, RESPA.

First published on BankersOnline.com 7/16/07