Source: https://www.classactiondefenseblog.com/24_cfr_350015regulations_conce/
Timestamp: 2019-10-21 03:19:19
Document Index: 401001937

Matched Legal Cases: ['§ 3500', '§ 3500', '§ 3500', '§ 3500', '§ 3500', '§ 3500', '§ 3500', '§ 3500']

24 CFR § 3500.15—Regulations Concerning Affiliated Business Arrangements Under Regulation X (Real Estate Settlement Procedures Act-RESPA) — Class Action Defense Blog — April 1, 2007
For those class action defense attorneys who defend against RESPA (Real Estate Settlement Procedures Act) class actions, we provide the text of Regulation X. Congress gave authority to the Secretary of the Department of Housing and Urban Development (HUD) to promulgate regulations for RESPA, and the regulations are set forth in 24 CFR § 3500.1 et seq. The regulations concerning affiliated business arrangements are set forth in § 3500.15, which provides:
§ 3500.15. Affiliated business arrangements
(b) Violation and exemption. An affiliated business arrangement is not a violation of section 8 of RESPA (12 U.S.C. 2607) and of § 3500.14 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)).
(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 § 3500.7(d) is provided; and
(ii) Whenever an attorney or law firm requires a client to use a particular title insurance agent, the attorney or law firm shall provide the disclosures no later than the time the attorney or law firm is engaged by the client. Failure to comply with the disclosure requirements of this section may be overcome if the person making a referral can prove by a preponderance of the evidence that procedures reasonably adopted to result in compliance with these conditions have been maintained and that any failure to comply with these conditions was unintentional and the result of a bona fide error. An error of legal judgment with respect to a person’s obligations under RESPA is not a bona fide error. Administrative and judicial interpretations of section 130(c) of the Truth in Lending Act shall not be binding interpretations of the preceding sentence or section 8(d)(3) of RESPA (12 U.S.C. 2607(d)(3)).
(2) No person making a referral has required (as defined in § 3500.2, “required use”) any person to use any particular provider of settlement services or business incident thereto, except if such person is a lender, for requiring a buyer, borrower or seller to pay for the services of an attorney, credit reporting agency, or real estate appraiser chosen by the lender to represent the lender’s interest in a real estate transaction, or except if such person is an attorney or law firm for arranging for issuance of a title insurance policy for a client, directly as agent or through a separate corporate title insurance agency that may be operated as an adjunct to the law practice of the attorney or law firm, as part of representation of that client in a real estate transaction.
(3) The only thing of value that is received from the arrangement other than payments listed in § 3500.14(g) is a return on an ownership interest or franchise relationship.
(B) Bona fide business loans, advances, and capital or equity contributions between entities in an affiliate relationship (in any direction), are not prohibited–so long as they are for ordinary business purposes and are not fees for the referral of settlement service business or unearned fees.
(iii) Neither the mere labelling of a thing of value, nor the fact that it may be calculated pursuant to a corporate or partnership organizational document or a franchise agreement, will determine whether it is a bona fide return on an ownership interest or franchise relationship. Whether a thing of value is such a return will be determined by analyzing facts and circumstances on a case by case basis.
(1) Associate is defined in section 3(8) of RESPA (12 U.S.C. 2602(8)).
(2) Affiliate relationship means the relationship among business entities where one entity has effective control over the other by virtue of a partnership or other agreement or is under common control with the other by a third entity or where an entity is a corporation related to another corporation as parent to subsidiary by an identity of stock ownership.
(3) Beneficial ownership means the effective ownership of an interest in a provider of settlement services or the right to use and control the ownership interest involved even though legal ownership or title may be held in another person’s name.
(4) Control, as used in the definitions of “associate” and “affiliate relationship,” means that a person:
(5) Direct ownership means the holding of legal title to an interest in a provider of settlement service except where title is being held for the beneficial owner.
(6) Franchise is defined in 16 CFR 436.2(a).
(7) Franchisor is defined in 16 CFR 436.2(c).
(8) Franchisee is defined in 16 CFR 436.2(d).
(9) Person who is in a position to refer settlement service business means any real estate broker or agent, lender, mortgage broker, builder or developer, attorney, title company, title agent, or other person deriving a significant portion of his or her gross income from providing settlement services.