Hi Chantal,

There are some mortgage brokers in my area trying to get Realtors to take the mortgage application & do some of the processing of the mortgage.  They are willing to split the mortgage commission with the Realtor.  They are telling agents that it is ok as long as they send the Realtor a 1099 at the end of the year.  

With all of the mortgage fraud going on, most of the agents in my area are not participating in these deals.  Like you said....if it sounds too good to be true, it probably is.

Rob

If I was referring them they would probably be a buyer client. This would add 3% to tcost of the transaction. It might be legal, but to me it is unethical, and not smart. I can imagine something going awry, a lawsuit, the buyer claiming I made the referral, then upon closer examination it is discovered I am receiving 3% to refer -- ugly.

If they are good and deserve referrals, I would ask that they simply lower the cost of the loan by 3% so my buyer can save money.

I don't like these set-ups.

It is correct that if you only provide a referral, such as a buyer name and phone number, then a commission cannot be paid without violating RESPA.

I do NOT advocate violating RESPA as that would be VERY BAD.

However, RESPA allows lenders or even title companies and home inspectors to pay service providers who provide an actual service.  Pay can be per hour or per transaction.  The only real caveat is that the pay must be reasonable for the amount of work performed.  

This means real estate agents who are NOT loan officers can definitely be paid for providing clerical or other services to lenders.  Assisting a buyer with a loan application is an actual service.  You provide a real service when you help a buyer fill out a loan application, or when you collect and deliver to the lender any documents needed in support of a loan application - even if you deliver by fax or email.  

Programming your web site to display a form that is a loan application and having that automatically sent to the lender is providing an actual service : )  

As long as you are providing a real service, and NOT REQUIRING your clients to use this loan, and NOT STEERING clients to a lender who does not have competitive terms - just to get the commission, there should be no problem and you can collect a commission.

Further, some lenders will buy leads from you.  This also is allowed, because they can buy a mailing list and you can sell a mailing list.  This lead sale must not related to the success of the transaction.  Even if the lender does not get the business, they must pay for all leads you provide if this is the concept.

If your web site privacy policy informs visitors - before they submit personal information, that their information may be shared with team members or affiliated service providers, and if team members or affiliated service providers is defined as allied professionals such as lenders or home warranty companies, then you can sell the mailing list names and addresses that come from your web site.

Quoting from the statute:  

(with special reference to section (c) 2) of the last paragraph):

####################

"TITLE 12--BANKS AND BANKING

CHAPTER 27--REAL ESTATE SETTLEMENT PROCEDURES

Sec. 2607. Prohibition against kickbacks and unearned fees

(a) Business referrals

No person shall give and no person shall accept any fee, kickback,

or thing of value pursuant to any agreement or understanding, oral or

otherwise, that business incident to or a part of a real estate

settlement service involving a federally related mortgage loan shall be

referred to any person.

(b) Splitting charges

No person shall give and no person shall accept any portion, split,

or percentage of any charge made or received for the rendering of a real

estate settlement service in connection with a transaction involving a

federally related mortgage loan other than for services actually

performed.

(c) Fees, salaries, compensation, or other payments

Nothing in this section shall be construed as prohibiting (1) the

payment of a fee (A) to attorneys at law for services actually rendered

or (B) by a title company to its duly appointed agent for services

actually performed in the issuance of a policy of title insurance or (C)

by a lender to its duly appointed agent for services actually performed

in the making of a loan, (2) the payment to any person of a bona fide

salary or compensation or other payment for goods or facilities actually

furnished or for services actually performed..."

############

another problem with this is the following ... as an agent, you need to act in the best interest of your client, the buyer ...as someone working for the lender, you have to act in the best interest of the bank/lender, not the buyer ... and sometimes these can be two different things.

I've had a lender contact me about the same thing in the past and I didn't want to do it, mainly for the reason above.

These type programs have been around awhile. I don't allow it in my office since I feel it is a conflict. I suggest that you find a few good lenders and your compensation is that they referrer to you and you to them. Quid pro, no compensation just a partnership of sorts. They do the best job for your referrals and you for theirs.

It is clean and everyone wins. I have a former client that became a mortgage broker four years ago and we have been referrering clints to wach other for some time. Don't keep score on who owes who, but I do know that everyone I sent her has been happy.

Chantal:  

I believe you will find that "Employment" can mean "contract" or "piecework" or even "freelance".  You don't have to be an hourly employee.  Very few loan companies use hourly employees anyway : )

Gary:

Yes, best interest of client should control.  Question:  Do you feel that a smooth deal and professional treatment by a lender are in the client's best interest?  Is a low rate from a shop that may bait and switch, or one that muffs a closing from time to time really in the client best interest?  I always told my clients they can shop for rates all they want, and that I don't REQUIRE them to use my preferred lenders - but that my lenders were TRUSTWORTHY and RELIABLE.  With client best interest in mind, I think an agent can be completely comfortable recommending such a lender.  

When it comes to more informal, habit based, mutual referring relationships, aren't you again giving up on getting your client the single best rate in town that day in favor of trust, and reliability?  

About the "quid pro quo" - Does that really mean something like "THIS for THAT" in latin?  Does it really mean payment for service when the payment is barter instead of cash?  It's still a payment and it might still cost a client the single best rate in town... But if you have higher confidence in probability of fair and honest treatment for your client, and that the deal will close at the same rate quoted in the beginning, then I think it is valid.  Not complaining - just observing - it's still a payment.  

Chantal, I was offered a similar program several years ago from a very good and reliable lender but didn't think it made sense from an ethical perspective. I'd rather devote my efforts exclusively to offering the very best real estate services to my clients, give them the names of excellent providers (lender, inspectors, attorneys, etc.) for them to choose from than try to make an extra dollar.

When I make a referral, I seldom give just one choice. I normally give several that I know will do a good job and have the client make the choice, albeit lender, inspector or whatever. If I send enough referrals to my barber, he will eventually reciprocate, however my reason for the referral is because he is good.

Chantal good question.  I agree that to me I wouldn't do it for seeming unethical.  I agree with Gary, I usually give out at least 3 choices, and not always the same 3 companies.  I just wouldn't feel comfortable with taking a bonus from the mortgage companies.

Tony

I have a fundamental problem with being a "combo agent / lender".

I posted about it on my blog back in July:

http://www.phoenixrealestateguy.com/the-combination-real-estate-agent-lender-one-stop-shopping-or-half-assed-service/418