Affiliated business arrangements (AfBA) are not a new concept. They have been around for approximately 30 years, and the laws governing AfBAs really have not changed during that time.
So what has changed? Why are AfBA’s such a concern right now?
The major change that has taken place in the affiliated business world in the last few years is the designation of a new regulator. The Department of Housing and Urban Development (HUD) had the authority to interpret and enforce RESPA until July 2011, when the Consumer Financial Protection Bureau (CFPB) took over.
The CFPB has already filed AfBA-related enforcements actions, and the agency is clearly on the lookout for RESPA violation connected to affiliated businesses.
To determine whether or not your AfBA is lawful and can withstand regulatory scrutiny, you need to understand RESPA and the statute’s specific affiliated business requirements.
Sections 8(a) and (b) overview
You probably already have an idea of what RESPA Sections 8(a) and (b) are all about. Here’s a brief refresher.
Section 8(a) provides that no one can give and no one can accept a fee, kickback or thing of value pursuant to any agreement that settlement service business will be referred to any person. The agreement can be oral or even implied.
Section 8(b) states that no one can give and no one can accept a portion or split of a charge that was made or received for a settlement service other than for services actually performed.
“[What] settlement services [are] was resolved a long time ago,” said Mitchel Kider, chairman and managing partner at Weiner Brodsky Kider PC, at October Research, LLC’s 2014 National Settlement Services Summit. “It’s any service provided in connection with a real estate settlement, including, without limitation, a number of things — the origination of mortgage loans, mortgage broker services, real estate agent services and title services.”
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