We are not aware of any law or regulation that would prohibit a bank employee from also working as a real estate broker in their free time, provided they do not receive any compensation for referring their clients to the bank, and provided that the employee does not act as both a real estate broker and mortgage loan originator on a single FHA-insured transaction.

Section 8 of the Real Estate Settlement Procedures Act (RESPA) generally prohibits banks from paying “any fee, kickback or other thing of value” for referrals involving a mortgage loan. Because the loan originator would not be receiving any compensation for referrals, we do not believe that this arrangement would create any RESPA Section 8 issues.

Additionally, the FHA Single Family Housing Policy Handbook prohibits dual employment, stating that an FHA-approved lender “must require its employees to be its employees exclusively, unless the [lender] has determined that the employee’s other outside employment, including any self-employment, does not create a prohibited conflict of interest.” The Handbook goes on to define “conflicts of interest,” stating “[e]mployees are prohibited from having multiple roles in a single FHA-insured transaction” and “[e]mployees are prohibited from having multiple sources of compensation, either directly or indirectly, from a single FHA-insured transaction.” Because the loan originator would not be serving as both a real estate broker and loan originator on any loans, we do not believe that this arrangement would violate the FHA’s prohibition on dual employment.

As a safeguard, your bank might consider expressly prohibiting the employee from originating loans for any of the employee’s real estate brokerage clients. We also recommend that you check your bank’s ethics policy and code of conduct for any limitations on dual employment.

Please note that we are not qualified to provide guidance on potential ethics issues for the employee arising under their broker-related requirements, such as real estate broker licensing laws, the National Association of Realtors Code of Ethics and Standards of Practice (if applicable), and the employee’s managing broker’s internal policies.

For resources related to our guidance, please see:

• RESPA, 12 USC 2607(a) (“No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.”)

• Regulation X, 12 CFR 1024.14(b) (“No person shall give and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person. Any referral of a settlement service is not a compensable service, except as set forth in § 1024.14(g)(1). A company may not pay any other company or the employees of any other company for the referral of settlement service business.”)

• Regulation X, 12 CFR 1024.14(g)(1)(iv) (“(1) Section 8 of RESPA permits: . . . (iv) A payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed; . . .”)

• FHA Single Family Housing Policy Handbook, page 17 (June 29, 2022) (“Dual Employment. The Mortgagee must require its employees to be its employees exclusively, unless the Mortgagee has determined that the employee’s other outside employment, including any self-employment, does not create a prohibited conflict of interest.”)

• FHA Single Family Housing Policy Handbook, page 17 (June 29, 2022) (“Conflicts of Interest. Employees are prohibited from having multiple roles in a single FHA-insured transaction. Employees are prohibited from having multiple sources of compensation, either directly or indirectly, from a single FHA-insured transaction.”)