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    We have an attorney who will be on our service provider list that is a major stockholder of the bank. Would he be an “affiliate” for the purpose of 0% tolerance?


    The definition of affiliate in 1026.19 refers us to 2016.32(b)(5) which then refers to 12 USC 1841 – the Bank Holding Company Act (this is different than the definition in RESPA). It tells us that:

    (k) Affiliate.— For purposes of this chapter, the term “affiliate” means any company that controls, is controlled by, or is under common control with another company.
    (a)(2) Any company has control over a bank or over any company if—
    (A) the company directly or indirectly or acting through one or more other persons owns, controls, or has power to vote 25 per centum or more of any class of voting securities of the bank or company;
    (B) the company controls in any manner the election of a majority of the directors or trustees of the bank or company; or
    (C) the Board determines, after notice and opportunity for hearing, that the company directly or indirectly exercises a controlling influence over the management or policies of the bank or company.

    If the attorney has the power to vote 25% or more of voting the securities I would consider them an affiliate.

    Kelly or Jack – what are your thoughts?


    I agree with Robin on this as well. The affiliate definition can cause some confusion but if you look at the explanation provided in Robin’s response, the attorney would need to meet one of the requirements in (A)(B) or (C) to qualify as an “affiliate”. If he is a “major stockholder” as stated above, he may fit that definition.

    Unless one of those is met, then the attorney may be considered under an Affiliated Business Arrangement under RESPA, which is defined as:

    Affiliate relationship means the relationship among business entities where one entity has effective control over the other by virtue of a partnership or other agreement or is under common control with the other by a third entity or where an entity is a corporation related to another corporation as parent to subsidiary by an identity of stock ownership.

    “Control”, (under RESPA) as used in the definitions of “associate” and “affiliate relationship,” means that a person:

    (i) Is a general partner, officer, director, or employer of another person;

    (ii) Directly or indirectly or acting in concert with others, or through one or more subsidiaries, owns, holds with power to vote, or holds proxies representing, more than 20 percent of the voting interests of another person;

    (iii) Affirmatively influences in any manner the election of a majority of the directors of another person; or

    (iv) Has contributed more than 20 percent of the capital of the other person.

    If this definition is met, an Affiliated Business Arrangement Disclosure must be provided to the borrower under RESPA.

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