OCC Warns Against Sham Affiliations

The Office of the Comptroller of the Currency is warning national banks that they can face "substantial penalties" for participating in "sham" business arrangements with title companies, real estate brokers and other settlement service providers.An OCC bulletin advises national banks to "carefully review" the Department of Housing and Urban Development's policy statement on affiliated business arrangements so that they don't violate the Real Estate Settlement Procedures Act's prohibitions on referral fees. "The policy statement provides guidance for assessing whether payments to a third party are for services rendered and yield an acceptable return on ownership interest, or are for an illegal payment for the referral of settlement service business," the OCC bulletin says. HUD has become more aggressive in going after sham affiliations in the past few years.