By way of example, HUD offers the following situation from its Policy Statement on Sham Controlled Business Arrangements, taken from the Federal Register (see www.
Here is an example given by HUD, in its Policy Statement on Sham Controlled Business Arrangements, of what is permitted.
According to published guidance in its Policy Statement on Sham Controlled Business Arrangements, HUD would consider this an example of an entity that is a bona fide provider of settlement service business rather than a sham arrangement.
What is particularly interesting about this example is that if all--or even most--of the CBA's loans were funded by the banking entity parent, the CBA would likely run afoul of the CBA exemption under HUD's Policy Statement on Sham Controlled Business Arrangements analysis.
After conducting extensive hearings before the House Subcommittee on Housing and Community Development in 1981, it amended RESPA in 1983 to provide that controlled business arrangements were allowable under RESPA so long as certain safe-harbor provisions were observed.
Two and a half years before Representative Roukema's instructions, HUD had published a proposed rule on the controlled business arrangements and had proposed to update other language recognizing changes in the mortgage lending industry.
Since 1983, the mortgage industry has been waiting for HUD to lay down fair and workable rules on controlled business arrangements and CLOs.
HAVE YOU BEEN SITTING ON THE FENCE WAITING for HUD to resolve the decade-long debate over controlled business arrangements and computer loan originations?
During the mid- to late 1980s, many national real estate brokerage firms formed controlled business arrangements.
As for controlled business arrangements, two roadblocks in earlier HUD informal advisory opinions were removed.
New controlled business arrangements
, referrals between controlled business affiliates, joint between independent settlement services providers and incentive payments to employees paid by their employers to encourage such referrals will become commonplace.
Congress passed a compromise law that legalized controlled business arrangements
if certain conditions were met--the arrangement was disclosed; the referring party could not, with certain exceptions, require the use of the related company; and there could be no payments between the parties except normal dividends or distributions.