OCC 2005-27
OCC Bulletin

Subject:        Real Estate Settlement Procedures Act
Description:  Sham Controlled Business Arrangements

Date:            August 4, 2005

TO:  Chief Executive Officers and Compliance Officers of All
   National Banks, Department and Division Heads, and All
   Examining Personnel

The Office of the Comptroller of the Currency (OCC) has noted
that third parties have approached some national banks to form
affiliated business arrangements (ABAs) to offer real estate
settlement services.  National banks that choose to enter into
ABAs with third parties must ensure that such arrangements comply
with section 8 (12 USC 2607) of the Real Estate Settlement
Procedures Act (RESPA).  This bulletin is being issued to remind
you of the Department of Housing and Urban Development's (HUD)
1996 policy statement on "Sham Controlled Business Arrangements,"
now known as affiliated business arrangements.  Although the name
of the business arrangements has changed, HUD continues to stand
behind its interpretation of section 8 of RESPA, as explained in
the policy statement. The OCC transmitted HUD's policy statement
in 1996 as an attachment to OCC Bulletin 96-41.  The OCC is
redistributing the policy statement with this bulletin.

HUD's policy statement contains 10 factors that will be
considered in determining whether an affiliated business entity
is a bona fide provider of settlement services.  The policy
statement also 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.

Due to the substantial penalties and liabilities provided in 12
USC 2607(d), national banks that have formed, or plan to form
ABAs with third parties to perform real estate settlement
services, should carefully review HUD's policy statement and
ensure that the structure, operating agreement, and activities of
these entities do not violate section 8 of RESPA.  Banks seeking
to provide real estate settlement services through operating
subsidiaries or noncontrolling investments also should review
guidance in the OCC's Licensing Manual, Investment in
Subsidiaries and Equities (12 CFR 5.34(e)(5)(v)(V)).

Questions regarding this bulletin may be directed to the
Compliance Policy Department at (202) 874- 4428 or the Community
and Consumer Law Division at (202) 874-5750.


_____________________________
Ann F. Jaedicke
Deputy Comptroller for Compliance Policy

Attachment: 61 FR 29258
[http://www.occ.treas.gov/fr/fedregister/61fr29258.pdf]