Loan Officer/Agents - Dual Role Legality under FIRREA

[skinners1]

I know mortgage brokers that are licensed real estate agents and act as both the mortgage person and the real estate agent on transactions. Is it alright to do this? Does anyone know where I can find specific information regarding this? Any insights would be greatly appreciated!

Thanks!

[AaronSOLD]

As much as I think that this would be a great way to increase my income, I think that it opens a Pandora's Box of questions & potential problems. There are some inherent conflicts of interest that come with playing a dual role that could lead to legal problems if a customer feels wronged. In today's litigous society I think that there are enough ways to get in trouble just being a real estate agent.

I think it is also important to look at how to service the client to the best of your ability. I think that means doing one of the two better than trying to do both mediocre.

[skinners1]

Thank you for you feedback. I recognize the company that you work for and understand that your brokerage group offers mortgage, title, and closing services on top of the real estate brokerage. Do these obviously intermingled business interests not present the conflicts that you speak of and if so how as they are all owned by the same company...???

Thank you for your feedback!

[AaronSOLD]

That's kind of a baited question. Yes, we do offer one-stop shopping. The key difference is that it is never the same person offering more than one service. With different people playing different roles, the conflict of interest is not there as my compensation remains exactly the same if <b>my client</b> chooses a different service provider however, there are quite a few streamlined procedures when it is all done by the same company that makes the process smoother.

I like to provide names of a couple loan officers I have had good experiences with, and they are not all employed by my parent company. I am really good at what I do and they are really good at what they do... and the customer is very well served by all of us... which leads me to believe it works well.

People who want to collude to create fraud or other illegal activity will always find a way to do it, and there will always be people who, rightly or wrongly, feel that they were cheated. When you are the sole provider of services to a customer, it would be a lot easier to imagine and alledge inappropriate conduct than it would be to make those same allegations of a group of people.

To sum it up, there are ways to be successful at providing mortgage & real estate as one person but I personally believe it is not worth the headaches that come along with it. Also, always make sure whatever you are doing is 100% legal by consulting with the appropriate attorney(s) :-)

To get back to your original question, if you can get a copy of the Realtor magazine, the back usually have ads for how to originate loans and be a licensed agent... that may be a good place to look. Otherwise, scout the area for mortgage or real estate brokers that do the same thing and talk with one of them.

[judyo]

I tried this many years ago before it was as popular as it is today. I hated it, although things weren't as streamlined as they are now for both professions.

Besides the extra paperwork involved back then, I felt uncomfortable about it then & still do. I think it takes away from my professionalism as a REALTOR® to also be a loan officer. Just waters down the credibility for each position IMO.

I worked with C21 for 22 yrs. & used Cendant (also refereed to as Century 21 Mortgage or something in the beginning) as a choice for my buyers. I would have continued using them if I wasn't so unhappy with their services. There was still a degree of separation since I didn't handle the loan.

There are more & more agents taking this on & I really can't understand how they do it. Even though I have a favorite loan officer I still give buyer's a choice of 3 as I don't want a sour deal to go against me.

Not to mention that as a one-person show I don't have the time nor the inclination to do both during the busy season. I love real estate and even though I was trained many years ago on taking loans I never enjoyed it a fraction as much.

In fact, an agent from my office many years ago was an insurance salesman plus a real estate agent & he lost several of his real estate clients because they said he was their insurance agent. I, personally, would not feel comfortable working with an agent that wore diffferent hats.

[Falcon Living]

Hey Judy,

I know you are a successful realtor. Why dont you ever get an assistant? Major prevents it? or just that you hate managing? With an assistant you could be a mortgage person or actually have some time?

[judyo]

Mert,

I quit Major as they shut down our Orland office after 6 months. Went with the same set-up but with a much better (& local) company with offices in Orland, SW side of Chicago & opening new ones in Oakbrook & Wicker Park.

I'm very bad at delegating & would like to be able to have one of my kids (still living at home) help me when necessary. I work out of my home (rarely ever go into one of my offices) & work in my own time frame as I do enjoy "playing" with my grandkids as much as I possibly can.

Sure, I've worked some 50-60 hours a week in the busy season but that is not what I aspire to. I like to play too much! One of the (very few, IMO) benefits of gettin' old.

[Bob Crain]

I know mortgage brokers that are licensed real estate agents and act as both the mortgage person and the real estate agent on transactions. Is it alright to do this? Does anyone know where I can find specific information regarding this? Any insights would be greatly appreciated!

Thanks!

To answer your question, it depends on the state. In my state if you are a broker or if your broker of record allows his/her agents to do both then it is alright to do the loan and real estate. Imagine being the listing agent, buyers agent, and loan officer

As far as a problem with dual agency goes.. as long as you are not unethically gouging your clients on loans you Should never have a problem

But most companies that have affiliates also have disclosures stating that the client is not obligated to use these companies.

[HouseboyMike]

If you're handling a client's loan as well as representing them as their realtor, you must be clear that they can certainly obtain a loan elsewhere, and you can only charge standard fees for actual work that you perform on the loan. There's a RESPA checklist of tasks that you can perform. Also, realtors are not allowed to do FHA/VA loans. Check out www.respanewsupdate.com. If you're in CA, check out goloan.com. They have a program for realtors to do loans, including the checklist. Gee, hope you're not in my backyard!

[AZLender]

A Realtor HAS to do five items in addition to filling out the application in order to be compensated by the LO.

http://www.hud.gov/offices/hsg/sfh/res/resp0222.cfm
Section C

In the determination of whether payments from lenders to mortgage brokers are permissible under Section 8 of RESPA, the threshold question is whether there were goods or facilities actually furnished or services actually performed for the total compensation paid to the mortgage broker. In making the determination of whether compensable services are performed, HUD´s letter to the Independent Bankers Association of America, dated February 14, 1995 (IBAA letter) may be useful. In that letter, HUD identified the following services normally performed in the origination of a loan:

(a) Taking information from the borrower and filling out the application;

(b) Analyzing the prospective borrower´s income and debt and pre-qualifying the prospective borrower to determine the maximum mortgage that the prospective borrower can afford;

(c) Educating the prospective borrower in the home buying and financing process, advising the borrower about the different types of loan products available, and demonstrating how closing costs and monthly payments could vary under each product;

(d) Collecting financial information (tax returns, bank statements) and other related documents that are part of the application process;

(e) Initiating/ordering VOEs (verifications of employment) and VODs (verifications of deposit);

(f) Initiating/ordering requests for mortgage and other loan verifications;

(g) Initiating/ordering appraisals;

(h) Initiating/ordering inspections or engineering reports;

(i) Providing disclosures (truth in lending, good faith estimate, others) to the borrower;

(j) Assisting the borrower in understanding and clearing credit problems;

(k) Maintaining regular contact with the borrower, realtors, lender, between application and closing to appraise them of the status of the application and gather any additional information as needed;

(l) Ordering legal documents;

(m) Determining whether the property was located in a flood zone or ordering such service; and

(n) Participating in the loan closing.

[...] HUD articulated that it generally would be satisfied that sufficient origination work was performed to justify compensation if it found that:

The lender´s agent or contractor took the application information (under item (a)); and

The lender´s agent or contractor performed at least five additional items on the list above.

Same would apply for a Realtor acting as an LO