Affiliated Business Disclosure Under RESPA: A Brokerage Guide
If your brokerage owns part of a title company, a mortgage broker, or any other settlement service provider, and your agents send clients there, RESPA requires a separate written affiliated business disclosure before the referral happens. The disclosure explains the relationship, gives the provider’s estimated charges, and tells the consumer they are free to shop elsewhere. Without it, and without meeting the other conditions in Regulation X, the arrangement loses its protection from RESPA’s referral-fee ban.
This guide walks through what counts as an affiliated business arrangement (AfBA), who has to give the disclosure, when, what it must say, whether the client has to sign it, and how to keep records that hold up in an audit.
TL;DR
- An AfBA exists when a person who can refer settlement business has an affiliate relationship with, or more than a 1% ownership interest in, a settlement service provider and refers business to it.
- The disclosure must be a separate written notice in the Regulation X Appendix D format, given no later than the time of each referral (with specific lender and attorney timing rules).
- You cannot require clients to use the affiliate, and the only money that may flow back is a bona fide return on ownership, never a payment tied to referrals.
- Appendix D includes an acknowledgment line for the consumer’s signature, so collect and file it.
- Referral fees paid to agents are a different RESPA question. Track those separately, with documentation, rather than through payment apps.
Table of Contents
- What an affiliated business arrangement is
- Why the disclosure matters: Section 8 and the exemption
- Who must give the disclosure
- When the disclosure is due
- What the disclosure must contain
- Does the disclosure need to be signed?
- State rules can add to the federal baseline
- A worked example
- Where commission and referral payments fit in
- Perspective: paper trails win audits
- How to build a disclosure process that holds up
- Put your compliance records in one system
- FAQ
- Sources
What an affiliated business arrangement is
RESPA’s definition sits in 12 U.S.C. § 2602(7). An arrangement is an AfBA when a person in a position to refer settlement service business, or an associate of that person, has either an affiliate relationship with or more than a 1% direct or beneficial ownership interest in a settlement service provider, and then refers business to that provider or affirmatively influences the consumer’s choice of it.
Two details in Regulation X, 12 CFR 1024.15 matter for brokerages:
- Who is positioned to refer. The list includes real estate brokers and agents, lenders, mortgage brokers, builders and developers, attorneys, title companies and title agents, and others who earn a significant portion of their gross income from settlement services.
- What an affiliate relationship means. It covers entities under effective common or contractual control. Control includes, among other situations, holding more than 20% of another entity’s voting interests or contributing more than 20% of its capital.
In practice, a brokerage lands here in familiar ways: it co-owns a title agency with a title company, holds a stake in a mortgage joint venture, or owns an escrow or home warranty business. Having a preferred vendor with no ownership tie is not an AfBA, though other RESPA rules on referral payments still apply.
Why the disclosure matters: Section 8 and the exemption
RESPA’s Section 8 prohibits giving or accepting fees or things of value for referring settlement business. Affiliated arrangements would run straight into that rule, so the law carves out a safe path. The CFPB’s RESPA FAQs list affiliated business arrangements, subject to specified conditions, as a permitted arrangement under Section 8©(4).
The key word is conditions. Regulation X says an ABA is not a Section 8 violation only if the conditions in 1024.15 are satisfied. Those conditions are:
- Disclosure. The referring person gives a separate written Appendix D disclosure describing the relationship and the provider’s estimated charges, at the required time.
- No required use. The referring person does not require the consumer to use a particular provider, with narrow exceptions for certain lender and attorney or law firm situations.
- Bona fide return only. The only thing of value received from the arrangement is a return on an ownership or franchise interest. Compensation that is calculated or adjusted by referral volume, or that otherwise works as a referral fee, fails the test.
Miss any one and the safe harbor is gone. The arrangement is then judged under the ordinary Section 8 prohibition.
The sham arrangement trap
The third condition is where regulators look hardest. The OCC’s 2005 bulletin on sham controlled business arrangements warns that the affiliated entity must be a bona fide settlement service provider, and points to HUD’s factors for judging whether payments are for actual services or are an impermissible referral payment. It tells banks to confirm that their structure, operating agreement, and activities do not violate Section 8. A brokerage joint venture is held to the same logic: a shell with no real staff, office, or risk, collecting a share of fees for the referrals you send, is the pattern that draws scrutiny, whatever the paperwork says.
Who must give the disclosure
The duty falls on the person making the referral. For a brokerage, that usually means the brokerage, acting through its agents, when an agent steers a buyer or seller toward an affiliated title company, lender, inspector, or warranty provider. The disclosure goes to each person whose business is being referred.
Because agents are the ones talking to clients, the process has to be built into your workflow rather than left to memory. A common failure is that the affiliated provider’s marketing materials mention the relationship, but no one hands over the separate, standalone notice at the right moment.
When the disclosure is due
The CFPB’s text of 1024.15 sets the timing. The basic rule: the written disclosure goes on a separate piece of paper and must be given no later than the time of each referral. The exceptions:
- If a lender requires use of a particular provider, the disclosure is due by the time of the loan application.
- A lender’s referral may be covered when the good-faith estimate or the 12 CFR 1024.7(d) statement is provided.
- If an attorney requires use of a particular title agent, the disclosure is due when the attorney is engaged.
For a typical brokerage referral, think “before the agent says ‘call this title company.’” In a purchase, that is often at the first buyer consultation or when an offer is being prepared, not at the closing table.
What the disclosure must contain
The notice must follow the format of Appendix D to Regulation X. The model form identifies the recipient, the referring entity, the property, and the date. It then states that the referring party has a business relationship with the settlement service provider and may receive a financial or other benefit from the referral.
The regulation also requires you to explain the nature of the relationship, including the ownership and financial interest, and to give the provider’s estimated charge or range of charges, using HUD-1 Section L terminology as far as practical.
The consumer’s right to shop
The form must tell the consumer three things: use of the listed provider is not required as a condition of the loan settlement or of the purchase, sale, or refinance; other providers are frequently available; and the consumer is free to shop for the best service and rate. The form also lists estimated charges or ranges, including the separate lender-required category where it applies.
In plain terms, the disclosure does two jobs: it reveals your financial interest, and it keeps the client’s choice real.
A quick checklist for your template
| Element | What to confirm |
|---|---|
| Format | Separate page, structured as Appendix D |
| Parties | Recipient, referring entity, provider(s) named |
| Property and date | Filled in on every copy |
| Relationship | Ownership percentage or other tie described plainly |
| Charges | Estimated charge or range for each service |
| Shopping language | States use is not required and others are available |
| Acknowledgment | Signature line present |
Does the disclosure need to be signed?
The model form in Appendix D ends with an acknowledgment section. It reads, in substance, that the consumer has read the form, understands that the referring party is referring them to the described services, and understands the referring party may receive a financial or other benefit. A signature line follows.
So the standard format carries a signature line, and your template should too. Treat a signed copy as your proof that the disclosure was delivered on time, not as a formality. If a client declines to sign, note the date, the delivery method, and who handed it over. A signed acknowledgment alone does not cure a violation of the other conditions: a disclosure delivered on time still fails if you required the client to use the provider or if the money flowing back is tied to referrals.
State rules can add to the federal baseline
RESPA is a floor. Some states layer on their own rules. Colorado’s real estate regulator, for example, requires brokers to disclose an affiliated business arrangement to a consumer at the time of referral and adds state reporting events. Those are Colorado requirements, not federal ones. Check your own state’s real estate commission and any state forms before you finalize your template, and have your attorney confirm the final language.
A worked example
Say your brokerage holds a 40% stake in a local title agency, and your agent is working with a buyer.
- The ownership is above 1%, and above the 20% control threshold, so this is an AfBA.
- Before the agent recommends the agency, the buyer receives a separate Appendix D form stating the relationship, the agency’s estimated charges, and the right to choose another title company.
- The buyer signs the acknowledgment. The brokerage scans it into the transaction file.
- The buyer is free to use any title company. No one at the brokerage makes the sale or the commission conditional on the choice.
- The brokerage receives its share of the agency’s profits as a return on ownership. Agents are not paid per referral to the agency.
Step 5 is where many brokerages get into trouble. Rewarding agents with a cut for each file sent to the affiliate can turn a permitted arrangement into a prohibited referral payment.
Where commission and referral payments fit in
The disclosure covers the relationship between your brokerage and an affiliated provider. A separate set of payments moves through brokerages every month: agent splits, referral fees to other brokerages, and co-op commissions. They raise their own compliance questions, and they rest on the same foundation as an AfBA: clear documentation of who was paid, why, and for what service.
We built BrokerPay for that side of the house. Our platform tracks, documents, and processes agent splits, referral fees, and co-op commissions through brokerage-controlled accounts, with approval workflows and audit trails. If you want to see how documented payment flows look in practice, our compliant co-op payment workflow examples are a good start, and our explainer on what a real estate payment gateway does covers the mechanics.
Perspective: paper trails win audits
We talk with brokerages about compliance every week, and the pattern is consistent. The disclosure form itself is rarely the problem. The problem is that the proof lives in a dozen places: a signed PDF in one folder, a Venmo note in a phone, a text that says “sent you the referral money.” When a regulator, a lender, or a client’s attorney asks what happened on a file, the brokerage has to reconstruct it from memory.
Our view is simple. Every referral relationship, whether it is an ownership tie with a title agency or a referral fee to another brokerage, should leave the same footprint: who, what, when, how much, who approved it, and where the money moved. That is why we route funds through brokerage-controlled accounts and keep approvals and records in one place, instead of letting agents settle up over peer-to-peer apps. We do not charge per-transaction software fees, so the compliance process does not get more expensive as volume grows.
A disclosure policy only works when someone owns it. Name that person, put the form in the transaction checklist, and review a sample of files each quarter.
— Wes
How to build a disclosure process that holds up
- Inventory your relationships. List every business in which the brokerage, its owners, or its managers hold more than 1%, plus any affiliate under common control. Include inspection, warranty, insurance, and moving companies if they could count as settlement services, and ask counsel where the line falls.
- Standardize the form. Use Appendix D structure, fill in the provider and charge ranges, and refresh the ranges when the provider changes its pricing.
- Put it in the workflow. Add the form to the buyer and seller onboarding checklists so it goes out before the first referral, not after.
- Collect signatures and file them. Keep each signed copy with the transaction record.
- Keep choice real. Train agents never to require the affiliate, and to present at least the option of shopping.
- Audit the money. Confirm that distributions from the affiliate reflect ownership, not referral counts, and that agent compensation is not keyed to affiliate volume.
- Review yearly. Ownership shifts, new vendors, and state rule changes all call for a fresh look. Have your attorney sign off on the template.
Put your compliance records in one system
If your brokerage still pays splits and referral fees through payment apps, you have a records gap that no disclosure form can close. BrokerPay offers Starter, Growth, and Enterprise plans with flat monthly pricing based on agent count, and a 30-day refund guarantee. You can see the plans and request details at brokerpay.io.
FAQ
What is an affiliated business arrangement under RESPA?
It is a situation where someone positioned to refer settlement business, or an associate, has an affiliate relationship with or more than a 1% ownership interest in a settlement service provider, and refers business to that provider. Brokerages with a stake in a title or mortgage company are the classic example. The arrangement is allowed only when the disclosure, no-requirement, and bona fide return conditions are met.
What disclosures does RESPA require for these arrangements?
The referring party must give each person whose business is referred a separate written notice in the Appendix D format. It describes the relationship, states the possible benefit to the referrer, gives estimated charges, and tells the consumer they may shop for other providers. Other RESPA disclosures, such as those from lenders, are separate obligations.
Does the affiliated business disclosure need to be signed?
The Appendix D model form includes an acknowledgment and a signature line, so your template should include one. A signature is your best evidence that the consumer saw the notice. It does not fix problems with the other conditions, such as requiring use of the provider or paying for referrals.
When do I have to give the disclosure?
No later than the time of each referral, on a separate piece of paper. Special timing applies when a lender requires a particular provider (by loan application) or when an attorney requires a title agent (when the attorney is engaged).
Can I require clients to use our affiliated title company?
Generally no. The exemption depends on not requiring use of a particular provider, with narrow exceptions for certain lender and attorney situations. Requiring the affiliate puts the arrangement outside the safe harbor. Ask your attorney about your specific facts.