Under RESPA, all Affiliated Business Arrangements (AfBA) must be also disclosed to the consumer. An AfBA is an arrangement in which a person who is in a position to refer business in connection with a real estate transaction has an ownership interest in a provider of settlement services and such person refers or influences the selection of that provider. The referring party must give the AfBA disclosure to the consumer at or prior to the time of referral. The disclosure must describe the business arrangement that exists between the two providers and give the borrower an estimate of the range of second provider’s charges. Appendix D of Reg X contains the disclosure form. See the Affiliated Business Arrangement Disclosure Statement form located at the end of this Chapter.
Reg X prohibits referral fees associated with settlement services in conjunction with federally related mortgage loans, unless the referral fees fall under the list of permitted fees or the financial institution follows the conditions provided in Reg X in conjunction with affiliated business arrangements (which includes the Affiliated Business Arrangement Disclosure Statement).
Except in cases where a Bank refers a borrower to an attorney, credit reporting agency or real estate appraiser to represent the lender’s interest in the transaction, the referring party may not require the consumer to use the particular provider being referred.