CALIFORNIA LOAN CONNECTION: Should Realtors also be Loan Officers (or vice versa)?

By
Real Estate Mortgage Broker with San Diego VA Home Loans/858-777-9751

This topic tends to be a hot one.  Many folks will say that performing both functions is a conflict of interest.  I have never pursued selling homes because I don't want an appearance of impropriety to my good Realtor clients (they feed my family and send my little girl to private school).  Personally, I don't see the conflict of interest.  If anything, I believe that a Realtor may be the better choice to find financing for the buyer.

Some people have said that HUS disallows it.  That is just not correct.  HUD issed a ruling in 1999 that said that no employee of a HUD- approved lender could have a real estate license.  Well, in California, there was an uproar because many loan brokers fall under licensing by the Department of Real Estate.  HUD backed off of that requirement in 2001.

Here are the basic rules for compensation to Realtors for loan brokerage:

1- It must be disclosed to the buyer that the Realtor may be receiving compensation for loan origination.  It must be disclosed on the purchase agreement and loan disclosures.

2- The Realtor must perform 3 of the 13 origination functions as defined by HUD. 

3- The Realtor must have an employee/employer relationship with the mortgage brokerage lender; inasmuch, they're paid W2 wages for their commission.

4- Fees charged for loan origination must be consistent with fees charged by the other originators at their employer.

I hope we hear from agents on both sides of this issue. 

An article from your California Loan Connection. 

More good information on America's Most Opinionated Mortgage Broker.

 

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realtors as mortgage brokers

Comments 23 New Comment

Rainer
15,065
Tony Croft
Hoboken Mortgage Broker
I believe it's not a good idea not just for the client but for the agent or banker. It takes your focus off of your core business which is either helping people buy/sell homes or financing homes. Yes it is possble to do both but usually not well.
September 11, 2006 07:04 AM
Rainmaker
246,043
Gena Riede
Real Estate Broker - Sacramento CA Real Estate (916) 417-2699
Riede Real Estate, Lic. 01310792
This has been a pet peeve of mine for quite some time...I feel it is a conflict of interest and hope that NAR will see it that way, as well. If a realtor is actually doing a "good job" for their client, they don't have time to do both sides. Which means that both sides SUFFER and the client gets the raw end of the stick. I would like to see this practice stopped on both sides. If you are Lending do Lending if you are a Realtor be a REALTOR...concentrate on doing your very best in the area of your expertise and stop getting involved with other aspects that you know little or nothing about.
September 21, 2006 06:45 AM
Rainmaker
98,205
Robert D. Ashby
Robert Ashby Photography
I believe in the seperation of the services.  If a company is to have both within its list of services, then there needs to be "experts" assigned to one or the other division.  You must also not permit any "pressure" selling cross-division as this may create issues.  It is best to ensure no potential conflicts of interest result in the buyer/borrower's eyes.
September 25, 2006 09:58 PM
Rainer
14,375
Joseph Crespillo
Sellstate Realty First

Wow!  There is a whole lot of negativity and I think Brian has struck a nerve.  Well I disagree with 99% of you.  We are a shop that does both and I have quite a few agents that do a great job on both sides.  Our industry is consolidating.  Soon Banks will also be selling Real Estate.  It is just a matter of time.  The person that does both sides is in a position to help their client more than the peron that only does one side.  If you are making 3% on the real estate side could you use your origination fee to buy down the rate?  Of course.  Does this happen?  Somethimes.  If you truley are working on clients for life then you will not do something that will jeperdize that.

I agree with Robert.  At our company I work the loan side with 30 years experiance and Marguerite works the real estate side with 13 years experience.  We only hire people to do both that has a minimum of 3 yrs experioance in both.  If they don't, then they train with us until we believe they have the necessary skills to do both.

October 11, 2006 02:05 PM
Anonymous #23
Anonymous
Danny Flucke

Our clients appreciate having one person to answer all of their property/mortgage questions.  We made the "switch" after doing a regression analysis of why we were funding over 90% of refi apps - Yet less than 60% of purchase apps.  The issue was realtors dropping the ball.

Since taking over the complete transaction - Our fall-out ratio's have dramatically improved - And production skyrocketed.  Even in this tough market we are gaining 10-12% per quarter.

Any competent realtor can easily learn the loan process - And any competent mortgage originator can easily learn the real estate process. 

Lighten up - Selling a home and/or approving a loan is not rocket science or brain surgery.

For those with the proper skill sets - It is not difficult to deliver a high level "one-stop" experience for your clients.

In some cases we are able to negotiate a better deal for our clients - Waving or reducing commissions as required.  In a few - We needed to waive the real estate commission to make the deal work.  In others we waived profit on the mortgage.

The bottom line - If the clients weren't happy - And if we weren't happy - It wouldn't work...

Good luck....   Thanx, DF

February 16, 2009 08:08 PM
Rainmaker
298,656

Brian Brady

VA Home Loans/San Diego
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