Employees of federal credit unions have a conflict of interest if they disapprove a loan to a member and then refer the member to a mortgage banker that compensates that employee.
That's the opinion of NCUA Associate General Counsel Hattie Ulan in a letter to Trenton,, N.J. Police FCU CEO Barbara Rios.
Ulan wrote that loan officers must "decide whether to grant or deny loan applications absent economic incentives that could influence decisions against the best interests of members and the FCU.''
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She noted that while FCUs can act as a finder of mortgages and be compensated for doing so under NCUA regulations, other federal or local laws might prohibit them from doing so. She said the Real Estate Settlement Procedures Act may ban such referral fees, depending on the compensation arrangement.
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