We are thinking about offering $25 gift cards to existing bank customers who refer mortgage loans to us. Is that permissible? What if we provide the gift cards to employees or to others?

Providing a gift card to a bank customer for referrals of “federally related mortgage loans” would violate RESPA's prohibition against kickbacks.

RESPA's prohibition against kickbacks applies to “federally related mortgage loans,” which includes loans secured by 1-4 family residential real property and manufactured home (with certain exceptions, such as for temporary financing). There is no de minimis exception for gifts that have small dollar values – even something as minor as a notepad could be considered a “thing of value” for purposes of RESPA's prohibition against kickbacks. Consequently, if the mortgage loans are federally related mortgage loans, we do not recommend providing gift cards to customers for referrals of these loans.

There is an exception that applies to bank employees, which would permit you to provide de minimis gift cards or other things of value for referrals by bank employees. However, that exception does not extend to customers, vendors and other third parties.

For resources related to our guidance, please see:

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.”)

Regulation X, 12 CFR 1024.2 (“Federally related mortgage loan means: (1) Any loan (other than temporary financing, such as a construction loan): (i) That is secured by a first or subordinate lien on residential real property, including a refinancing of any secured loan on residential real property, upon which there is either: (A) Located or, following settlement, will be constructed using proceeds of the loan, a structure or structures designed principally for occupancy of from one to four families . . . ; or (B) Located or, following settlement, will be placed using proceeds of the loan, a manufactured home . . . .”)

HUD, FAQs About RESPA for Industry, Question 19, page 3 (“. . . if the lender gives the real estate agent note pads with the real estate agent’s name on it for the agent to use to market clients for its real estate business, then the note pads could be a thing of value given for referral of loan business, because it defrays a marketing expense that the real estate agent would otherwise incur.”)

Regulation X, 12 CFR 1024.14(g)(1) (“Section 8 of RESPA permits: . . . (vii) An employer’s payment to its own employees for any referral activities.”)