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ALEXANDRIA, Va.-A federal credit union may not charge a fee in promoting a bank’s reverse mortgage, according to a recent legal opinion letter out of NCUA. However, acting as a finder is a permissible activity under NCUA’s incidental powers rule. NCUA Associate General Counsel Sheila Albin wrote the letter, which pointed out that under the Real Estate Settlement Procedures Act (RESPA), receiving a fee for this work is prohibited. She also recommended that federal credit unions contact the Department of Housing and Urban Development (HUD) for interpretations on RESPA. “RESPA regulates the settlement process for federally-related mortgage loans, including reverse mortgages insured by FHA. 12 U.S.C. 2602(1). 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 . . . that business incident to or part of a real estate settlement service . . . shall be referred to any person. 12 U.S.C. 2607(a),” she cited. Albin explained that `referral’ is “broadly defined” in the HUD reg. Under the agreement between the federal credit union and the bank, the credit union would tell members about the product, assist members with application completion, and forward the applications to the bank. In exchange, the bank would pay the federal credit union a portion of the loan origination fee. Albin goes on to say that RESPA does allow payment of a fee by a lender to an agent “for services actually performed.” She clarified that HUD has ruled that completing a mortgage application alone does not fall under this category. “Note that “[w]hen a person in a position to refer settlement service business . . . receives a payment for providing additional settlement services as part of a real estate transaction, such payment must be for services that are actual, necessary and distinct from the primary services provided by such person.” 24 C.F.R. 3500.14(g)(3),” she quoted. But, for this credit union, simply adding an “actual service” would not be enough. The arrangement between the bank and federal credit union would pay the finder a percentage of the origination fee and would adjust depending upon the loan amount, which is also in violation of RESPA, because it may not reflect the cost of the services to the federal credit union. “In analyzing whether a particular payment or fee bears a reasonable relationship to the value of the good or facilities actually furnished or services actually performed, HUD believes that payment must be commensurate with that amount normally charged for similar services, goods or facilities.” Id. at 10086,” Albin quoted HUD. “Payments based upon a percentage of the loan amount are subject to this reasonableness test.” [email protected]

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