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Affiliated Business Arrangement Disclosure

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  • #2448
    dmurray
    Participant

    We have an issue that we’re concerned with.

    We have our appraisers selected from a “rolling list” (as all good banks do). One of the appraisers on the list has a DDA with us along with an ownership in our privately held stock. I believe his ownership is no more than 1%.

    Also both the attorneys we use to draw up real estate docs have or have had accounts and/or loans with us in the past 12 months. We don’t control or own any of either of these companies and visa versa.

    Our procedures and policies are purchased and this is a note provided within the RESPA procedures:
    For purposes of this requirement, a relationship exists if (1) the provider is an associate of the Bank, or (2) if within the previous 12 months the provider has maintained an account with the Bank or had a credit arrangement with the Bank, or (3) if the Bank has repeatedly used or required borrowers to use the services of the provider within the last 12 months.
    This note references 3500.7(e) – I go to that and I get a discription of the tolerance allowances on the GFE.

    I’d like to read a little more about this but I’m not finding it anywhere.
    Help?? 🙂

    #2848
    jholzknecht
    Keymaster

    The definition of the term “affiliated business arrangement” is defined in Section 2602(7) of the Real Estate Settlement Procedures Act. The term “affiliated business arrangement” means an arrangement in which (A) a person who is in a position to refer business incident to or a part of a real estate settlement service involving a federally related mortgage loan, or an associate of such person, has either an affiliate relationship with or a direct or beneficial ownership interest of more than 1 percent in a provider of settlement services; and (B) either of such persons directly or indirectly refers such business to that provider or affirmatively influences the selection of that provider; and (8) the term “associate” means one who has one or more of the following relationships with a person in a position to refer settlement business: (A) a spouse, parent, or child of such person; (B) a corporation or business entity that controls, is controlled by, or is under common control with such person; (C) an employer, officer, director, partner, franchisor, or franchisee of such person; or (D) anyone who has an agreement, arrangement, or understanding, with such person, the purpose or substantial effect of which is to enable the person in a position to refer settlement business to benefit financially from the referrals of such business.

    The definition in your procedures is inaccurate and should be corrected.

    Also, confirm the appraiser’s level of ownership in your bank. If the level exceeds 1%, the appraiser has an affiliate relationship with your bank and would need to provide an affiliated business arrangement in the event of a referral to the bank. This actually the appraiser’s concern, not the bank’s.

    #2849
    dmurray
    Participant

    Thank you! I thought I was literally going crazy! 🙂
    Much appreciation.

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