Yes, you may pay mortgage referral fees to bank employees who refer mortgage business to your bank. RESPA prohibits most referral fees related to mortgages, but that prohibition does not apply when compensating bank employees for mortgage referrals.
Any referral fees paid to bank employees who are loan originators for referrals also must comply with Regulation Z’s loan originator compensation requirements. Regulation Z prohibits compensating a loan originator based on the terms of a closed-end consumer loan secured by a dwelling. Referral fees should be structured so that they are not based on the terms of such mortgage transactions. For example, mortgage referral fees for loan originators could be based on the number or dollar amounts of loans referred — a loan originator’s total loan volume, whether in dollars or number of loans, is a permissible basis for loan originator compensation.
For resources related to our guidance, please see:
- 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.”)
- Regulation Z, 12 CFR 1026.36(d) (“Except as provided in paragraph (d)(1)(iii) or (iv) of this section, in connection with a consumer credit transaction secured by a dwelling, no loan originator shall receive and no person shall pay to a loan originator, directly or indirectly, compensation in an amount that is based on a term of a transaction, the terms of multiple transactions by an individual loan originator, or the terms of multiple transactions by multiple individual loan originators.”)
- Regulation Z, Official Interpretations, 12 CFR 1026, Paragraph 36(d)(1), Comment 2(i) (“Permissible methods of compensation. Compensation based on the following factors is not compensation based on a term of a transaction or a proxy for a term of a transaction: (A) The loan originator’s overall dollar volume (i.e., total dollar amount of credit extended or total number of transactions originated), delivered to the creditor. . . .”)
- Regulation Z, Official Interpretations, 12 CFR 1026, Paragraph 36(d)(1), Comment 9 (“A loan originator’s compensation may be based on the amount of credit extended, subject to certain conditions. . . .”)