As it appears that you are not referring your customers to the director’s title company, we do not believe that an Affiliated Business Arrangement Disclosure Statement is required.
RESPA and Regulation X require an Affiliated Business Arrangement Disclosure whenever you make a referral, including cases in which you require the use of a certain service provider, as well as “any oral or written action directed to a person which has the effect of affirmatively influencing” your customer’s selection of a service provider. As you are neither referring your customers to this title company nor listing them on your written list of service providers, you are not referring a business and the Affiliated Business Arrangement Disclosure is not required.
In the event that you do refer customers to this title company in the future, you must provide the Affiliated Business Arrangement Disclosure with the Loan Estimate or good faith loan estimate, as outlined in RESPA and Regulation X.
For resources related to our guidance, please see:
- RESPA, 12 USC 2602(7) (“[T]he term ‘affiliated business arrangement’ means an arrangement in which (A) a person who is in a position to refer business incident to or a part of a real estate settlement service involving a federally related mortgage loan, or an associate of such person, has either an affiliate relationship with or a direct or beneficial ownership interest of more than 1 percent in a provider of settlement services; and (B) either of such persons directly or indirectly refers such business to that provider or affirmatively influences the selection of that provider.”)
- RESPA, 12 USC 2602(8) (“the term ‘associate’ means one who has one or more of the following relationships with a person in a position to refer settlement business: (A) a spouse, parent, or child of such person; (B) a corporation or business entity that controls, is controlled by, or is under common control with such person
- Regulation X, 12 CFR 1024.15(c) (“Control, as used in the definitions of ‘associate’ and ‘affiliate relationship,’ means that a person:
(i) Is a general partner, officer, director, or employer of another person. . . .
(ii) Directly or indirectly or acting in concert with others, or through one or more subsidiaries, owns, holds with power to vote, or holds proxies representing, more than 20 percent of the voting interests of another person. . . .”)
- RESPA, 12 USC 2602(5) (“the term ‘person’ includes individuals, corporations, associations, partnerships, and trusts.”)
- Regulation X, 12 CFR 1024.15(b) (“An affiliated business arrangement is not a violation of section 8 of RESPA (12 U.S.C. 2607) and of § 1024.14 if the conditions set forth in this section are satisfied. Paragraph (b)(1) of this section shall not apply to the extent it is inconsistent with section 8(c)(4)(A) of RESPA (12 U.S.C. 2607(c)(4)(A)).
- The person making each referral has provided to each person whose business is referred a written disclosure, in the format of the Affiliated Business Arrangement Disclosure Statement set forth in appendix D of this part, of the nature of the relationship (explaining the ownership and financial interest) between the provider of settlement services (or business incident thereto) and the person making the referral and of an estimated charge or range of charges generally made by such provider (which describes the charge using the same terminology, as far as practical, as section L of the HUD-1 settlement statement). The disclosures must be provided on a separate piece of paper no later than the time of each referral or, if the lender requires use of a particular provider, the time of loan application, except that:
(i) Where a lender makes the referral to a borrower, the condition contained in paragraph (b)(1) of this section may be satisfied at the time that the good faith estimate or a statement under § 1024.7(d) is provided. . . .”)
- Regulation X, 12 CFR 1024.14(f)(1) (“A referral includes any oral or written action directed to a person which has the effect of affirmatively influencing the selection by any person of a provider of a settlement service or business incident to or part of a settlement service when such person will pay for such settlement service or business incident thereto or pay a charge attributable in whole or in part to such settlement service or business.
(2) A referral also occurs whenever a person paying for a settlement service or business incident thereto is required to use (see § 1024.2, ‘required use’) a particular provider of a settlement service or business incident thereto.”)
- Regulation X, 12 CFR 1024.2(b) (“Required use means a situation in which a person must use a particular provider of a settlement service in order to have access to some distinct service or property, and the person will pay for the settlement service of the particular provider or will pay a charge attributable, in whole or in part, to the settlement service. However, the offering of a package (or combination of settlement services) or the offering of discounts or rebates to consumers for the purchase of multiple settlement services does not constitute a required use. Any package or discount must be optional to the purchaser. The discount must be a true discount below the prices that are otherwise generally available, and must not be made up by higher costs elsewhere in the settlement process.”)