If you’ve read many of my blog postings here an on the other blogs where I post frequently you’ll know I am highly concerned with the LETTER and the INTENT of the law. It is very important to me to protect my clients, my associates, my employees, my investors, and my a$$. We have an online “university” started to keep us sharp (it will be open to the public soon) and most of the first few courses are on some type of industry law or fraud detection and prevention.
I was nearly decapitated in an email from a Texas (Corpus Christie) real estate agent in an email because I dared challenge his craigslist posting about Cash Back deals. He threatened to stick his closing attorney on me which kept me sleepless for nights.
It actually happened twice today: once on the mortgage side and once on the real estate side. The mortgage side took me by surprise. (You know I have to share this with the people out there because we’ve got to educate, right? Don’t be upset … I won’t use your name!) The real estate question was an “I already know this but I need to tell the buyer’s agent why I can’t have my seller give the buyer cash back at closing.”
We spend a minimum of 2 hours in training every week and a large portion of that time is spent on law and regulation. But I can see how this happened …
Even though we are a lender we also broker to other lenders. Today one of my top employees was contacted by an AE from a large (very large) investor who referred an Oregon based broker to us to see if we could close a loan for his client. It was an investor loan on a quad at 100% LTV so we came to the top of his list. I was working from the home office and she was at our North Atlanta Branch so she IM’d me:
Loan Officer: I told him I would be happy to work with them however we did notco-broker. He understood that and asked about a referral fee. He would like you to call and discuss or talk to me about what you want to do. I would love to do this. He said there will probably be 2-3 purchases.
Ken Cook: We can’t do any compensation BY LAW unless he is licensed in Georgia.
Ken Cook: He can probably get someone to break the law but not us.
Loan Officer: can a correspondent lender pay him something?
Ken Cook: Only if he’s licensed in Georgia
Ken Cook: We could probably give him a discount on some of the fees [to the client] but that’s about it.
Loan Officer: So maybe he could charge his customer a fee and we discount ours that amount?
Ken Cook: I would say that would be up to the other broker to figure.
Loan Officer: How much would you be willing to discount.. we can take a look at that when I fiqure how much YSP I can make
Ken Cook: What’s the loan amount?
Loan Officer: Not sure. I will get more info
Ken Cook: Okay – let me know. I’ll be in tomorrow. I have a meeting in the AM at the office.
Loan Officer: He does not think it is against the law and will find other means…
Ken Cook: Okay. Good for him.
Loan Officer: Hated to lose that one
Ken Cook: Yep but it’s better than losing your ability to work in the mortgage industry in Georgia … at least until you move to South Carolina!
Loan Officer: Is that a GA law or national law?
Loan Officer: Most states have the law about practicing in their own state. Here’s the Georgia law …
Loan Officer: Authority O.C.G.A. ‘ 7-1-1012.
80-11-4-.05 Knowing Purchase, Sale or Transfer of Loan or Loan Application from
Unlicensed Entity.
(1) It is prohibited for any person to knowingly purchase, sell or transfer a mortgage loan or loan application to or from an unlicensed mortgage lender or broker, unless that entity is exempt from licensing. It is expected that all persons who purchase loans use reasonable diligence to determine whether the entities they do business with are licensed. To that end, the department has provided various means to determine whether an entity is licensed.
Ken Cook: If you want to save face with that guy you can email that to him. It’s located here: http://www.ganet.org/dbf/regs/80-11-4.pdf
Loan Officer: But that does not say anything about referral fees!!!
Ken Cook: It’s illegal … you cannot pay someone who is not licensed or an employee of an unlicensed entity … that also vioaltes a federal law, a portion of RESPA
Ken Cook: This is actually from the Maryland Association of Realtors but kind of helps explain why giving a referral fee to anyone for a loan is illegal: http://www.mdrealtor.org/How%20Much%20are%20Your%20Career%20and%20Freedom%20Worth%20to%20You.asp
Ken Cook: Of particular note with respect to referral fees in the mortgage loan context, Section 8 of the Real Estate Settlement Procedures Act (
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