Banks are bristling at a new rule that will require them to rethink the way they compensate employees for referring business to their mortgage subsidiaries.

The rule, published today in the Federal Register, solidifies the prohibition of payments by banks to employees who refer customers to mortgage subsidiaries unless a disclosure document is signed. Employees are also barred from receiving payments for more than one referral per customer.

The rule also eliminated an exemption for referrals made through computerized loan origination systems. Drafted by the Department of Housing and Urban Development to implement the Real Estate Settlement Procedures Act, the rule is now final.

"It's going to create a compliance nightmare for banks," said John Rasmus, senior federal administration counsel with the American Bankers Association. "It doesn't seem to make sense. Banks should be able to provide incentive to their employees for references to a subsidiary."

Requiring disclosure documents early on in the referral stage could discourage banks from referring customers to their mortgage subsidiaries, Mr. Rasmus said.

"The whole thing is unnecessary and useless," said Washington attorney Sue Johnson. "It's yet another layer of government regulation that will require a lot of expensive lawyers."

But representatives from the Mortgage Bankers Association of America waxed philosophical. "It's not a perfect solution, but then it's not a perfect world," said Paul Mondor, director of regulatory compliance.

The trade group is "tired of the whole war," he said, and thus finds the final rule acceptable.

The rule caps almost three years of wrangling with the complex and hotly contested issues of employee-employer payments and referral payments within affiliated companies.

Mortgage bankers, securities dealers, and their affiliates have been in legislative purgatory all the while. Left without well-defined boundaries, many have made their own rules.

"HUD has tried to provide clarity," said Larry Platt, a partner with Kirkpatrick & Lockhart, a Washington law firm. "Whenever you do that, people who have been relying on ambiguity to justify their course of action will be upset."

Now that the rule is final, interested parties are watching HUD to see it will be enforced. Current enforcement activities, stifled by HUD's lack of resources, are negligible, mortgage bankers say.

"I'm aware of numerous circumstances where there are Respa violations, either out of lack of training or out of total belligerence," said Patrick Flood, president of Homebanc Mortgage Corp., the mortgage subsidiary of First Tennessee National Corp., Memphis.

He said a focus on enforcement is particularly important right now, with tight margins forcing mortgage companies to turn toward affiliations to step up profits.

HUD has given affected companies 120 days to comply with the rule, double the time noted in the department's original proposal. Industry insiders say the Real Estate Servicers Providers Council, a trade group that looks at Respa-related issues, is behind the change.

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