mortgage banking companies arrange home loan originations

Note that “hen a person in a position to refer settlement service business. RESPA does allow, however, payment of a fee by a lender to a duly appointed agent or payment to any person for services actually performed. Regulation X specifically states that a “referral of a settlement service is not a compensable service.” 24 C.F.R. While RESPA does not prohibit an FCU from making referrals, it may not receive a fee for its referrals. By directing its members to a mortgage lender in this manner, the FCU is making referrals under Regulation X. An FCU affirmatively influences a member’s selection of a lender when it identifies members that qualify for reverse mortgages, markets the lender’s mortgage products to them, and then refers them to that particular lender.

Part 3500, the rule issued by HUD to interpret RESPA, the term “referral” is broadly defined.Ī referral includes any oral or written action directed to a person which has the effect of affirmatively influencing the selection by any person of a provider of a settlement service or business incident to or part of a settlement service when such person will pay for such settlement service or business incident thereto or pay a charge attributable in whole or in part to such settlement service or business.Ģ4 C.F.R. that business incident to or part of a real estate settlement service. Section 8(a) of RESPA prohibits any person from giving and any person from accepting “any fee, kickback, or thing of value pursuant to an agreement. RESPA regulates the settlement process for federally-related mortgage loans, including reverse mortgages insured by FHA. Other applicable federal or local law, however, may limit or prohibit an FCU from receiving compensation when acting as a finder. Therefore, an FCU may act as a finder of reverse mortgages offered by other financial institutions as a service to its members and earn income from engaging in finder activities, without restriction, under our rule. Acting as a finder, an FCU may perform administrative functions for vendors and its members to facilitate their transactions. Our incidental powers rule does not limit the types of vendors, products, or services an FCU may find for its members. Under this authority, an FCU introduces or otherwise brings together outside vendors with its members for the negotiation and consummation of transactions.

The FCU may find or refer its members to mortgage products funded by another financial institution under its incidental powers authority to act as a finder. In exchange for the FCU’s services, the bank would pay the FCU a percentage of the loan origination fee. The FCU would not represent the bank, perform any underwriting of the loan, or provide any membership lists to the bank. Under the bank’s arrangement with the FCU, the FCU would inform members about the mortgage product, assist them in completing the application, and forward applications to the bank. The Federal Housing Administration (FHA) insures these reverse mortgages in a program called the Home Equity Conversion Mortgage. You indicated in your letter and in a discussion with our staff that a bank has asked your client, an FCU, to market the bank’s reverse mortgages to the FCU’s members who are 62 years of age or older. The Department of Housing and Urban Development (HUD), not the NCUA, has the authority to interpret RESPA, and you should contact that agency if you have questions concerning the information provided in this letter about RESPA. While FCUs may generally earn income from finder activities without restriction, it appears that the Real Estate Settlement Procedures Act (RESPA) prohibits an FCU from receiving fees under the circumstances you have described. An FCU may provide its members the opportunity to obtain a reverse mortgage from a bank as a permissible finder activity. You have asked if a federal credit union (FCU) may promote a bank’s reverse mortgage products to its members under our incidental powers rule. Re: Federal Credit Union as a Finder of Mortgage Loans.

Mortgage banking companies arrange home loan originations