Spiffs, Cousins, and the Affiliated Title Company

Arrangement 1 - $500 higher-rate bonus: prohibited, twice over.

• RESPA Section 8(a) bars giving or accepting anything of value in exchange for the referral of settlement service business. Paying the bonus only when a particular product is chosen makes it a referral/steering fee.
• It is also compensation based on a term of the transaction, barred by 12 CFR 1026.36(d)(1).

Arrangement 2 - $250 per closing to the cousin: prohibited.

• Same Section 8 analysis, in both directions: paying for referrals is as illegal as receiving. There is no safe harbor for "family." Texas law adds its own prohibited-practice exposure for licensed originators and the cousin risks her real estate license.

Arrangement 3 - 15 extra basis points for using Premier: generally not permissible as structured.

• An affiliated business arrangement can be legal under Section 8(c)(4), but only if: the affiliate is a bona fide provider, the consumer is not required to use it, the only thing of value received is a return on ownership, no payment is made for referrals, and a written AfBA disclosure is given.
• A per-file compensation differential keyed to using the affiliate is a referral incentive in substance. It also creates a steering problem under 12 CFR 1026.36(e), and it distorts Ray's own pay in a way he then has to disclose to the borrower.

1. AfBA disclosure, in writing, at or before the referral. It must be in plain language, state the ownership relationship between the brokerage and Premier, state that the settlement service is available from other providers, and state the estimated charge (12 CFR 1024.15(c)).
2. No requirement to use Premier. The choice must be hers, and the file should show she was given alternatives. A verbal "they'll take good care of you" is not a choice.
3. No fee split for the referral itself. The brokerage's return must come from its ownership interest, not from Premier paying for customers. Charging fair market value for services actually performed is fine; paying for the referral is not.
4. Itemized, accurate closing costs - the title charges must appear on the Loan Estimate and Closing Disclosure consistent with the tolerance category. If Premier's charge was not disclosed and a tolerance is blown, the lender cures it; the borrower does not eat it.
5. Ray's compensation must not vary based on the affiliate's use in a way that functions as a referral payment.

Ray presents, in writing, the loan she qualified for and the cost of the alternative, and lets her choose.

The analysis:

• She qualifies at 6.25%. The 7.00% option costs roughly $200 more per month on a $300,000 loan (about $1,847 vs $2,048 P&I) and around $7,000 more over three years. There is no stated benefit to her - only a $500 bonus to the participants.
• Presenting a higher-cost product because it pays the originator and the affiliate more is steering, a breach of the duty of good faith, a Section 8 problem, and a UDAAP exposure for the brokerage. In Texas it is also a prohibited practice for a licensed MLO.

What Ray does:

1. Quote both options with the rate, APR, monthly payment, and total cost over her expected holding period.
2. Document that she chose, and why.
3. Decline the $500 bonus in writing and report the arrangement to compliance - the fact that a manager proposed it makes this a firm-level problem, not just Ray's.
4. Note that "cheapest" is not always the right answer: a slightly higher rate with materially lower closing costs can be cheaper over a short hold. Ray's job is to show the math, not to pick for her and not to pick for himself.