AfBA is the acronym used for an Affiliated Business Arrangement as discussed in RESPA, the Real Estate Settlement Procedures Act. Are you participating in an AfBA? Is it legal?
An AfBA, or Affiliated Business Arrangement first must involve a business that participates in providing settlement services for a real estate transaction. The other requirement for designation as an AfBA is that this company have someone in ownership of 1% or more that is in a position to refer the company business from a settlement transaction.
Examples of AfBA arrangements might include:
There are many other examples. Just know that RESPA was in part conceived to bring transparency to the settlement process. Part of that purpose is to regulate AfBA's and require specific methods of disclosure to the consumer.
It is not necessarily illegal to have an AfBA, or for a broker to refer business to a title company in which they have an ownership interest. The referral to the AfBA must meet Safe Harbor Rules, and HUD has another set of criteria to determine whether the AfBA is a viable company or not.
