| ID | Status | Date | Public/Private | Industry | AHACPA Contact |
|---|---|---|---|---|---|
| #7089 | Closed | public | FHA Lender | Les Sparks |
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Hi, I’m doing a new HUD audit based on the client not realizing they needed one (i.e. they missed the 3/31 deadline). I was curious of any insight on prohibited payments within the HUD handbook. The specific rule I’m referring to is as follows, “The Mortgagee, or any of the Mortgagee’s employees, must not pay or receive, or permit any other party involved in an FHA-insured mortgage transaction to pay or receive, any fee, kickback, compensation or thing of value to any person or Entity in connection with an FHA-insured mortgage transaction, except for services actually performed and permitted by HUD.” The client has a referral program where the employee gets a $100 fee if the loan closes — this includes employees that are involved in the FHA transaction, such as an underwriter. Their underwriter received $400 in 2017 for mortgage referrals which I feel is a prohibited payment. The FHA loans went through HUD prior to getting approval; therefore, the client thinks this is OK and they can update the policy going forward. My opinion is this is a finding and they need to have a corrective action plan to ensure there is a control surrounding referral fees of the policy is changed. It is an immaterial amount overall. In your experience, have you seen this as a finding? Thank you! |
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From Les Sparks: Any payment that is contingent of loan closure is a prohibited payment. This is really not a good thing. Here is the guidance from the Mortgagee Handbook on the matter. BTW, this is also a prohibited payment under any Dodd Frank provision you can think of. HUD Handbook 4000.1 Further Section 8 of RESPA prohibits the payment of referral fees in many instances. Specifically, the main prohibition is the payment for referrals based on the success of the mortgage. You can pay for bulk lists, but you cannot pay based on how many loans were generated. Les |