Question Details

Theresa, Home Buyer in Madison, WI

What is the relationship between lenders and realtors? What benefit do lenders receive from referring buyers?

Asked by Theresa, Madison, WI Sat Apr 19, 2008

to particular realtors?

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Answers

3
Chris,

Please contact your nearest HUD office for clarification on RESPA.

The section you quoted only talks about referrals between agents, real estate brokers and legitimate Affiliated Businesses.

Section 8 is the paragraph that applies to the question asked here.

Section 8 prohibits referral fees, kickbacks, fee padding and fee splitting.
1 vote Thank Flag Link Sat Apr 19, 2008
Thanks Lance, I'll do that and did look into RESPA more critically just now.

I have removed my answers from the post so as to not confuse the consumer.

Section 8 specifically prohibits referral fees, although affiliated businesses may receive referral fees.

The key word is 'affiliated'.

For example, this would apply to a mortgage company that owns, or is part owner too, a real estate company. In theory, the mortgage company would qualify a borrower, then refer them to a realtor within the affiliated real estate company thereby creating the legitimate basis for a referral fee. This is how I understand RESPA to apply to the question of the benefit to lenders who refer buyers to realtors.

If there is no 'affiliation' between the lending and real estate companies, there is a RESPA violation should a referral fee (either monetary or of valuable consideration) be paid.

The same basis for referral fee is true for the same real estate company to refer a buyer needing a mortgage to the mortgage company dually owned (even partially).

Otherwise, for non-affiliated relationships, the referral reward is non-monetary and an intrinsic value in having a professional network. It gets the job done.

I am curious how LendingTree can assess a referral fee from a participating realtor. Must be simple paperwork that creates the relationship.

Thanks again Lance for your clarification, all straight now.

Regards, Chris
Web Reference: http://www.HouseNow.com
0 votes Thank Flag Link Sat Apr 19, 2008
Despite what some Realtors may say, referral fees are absolutely prohibited under Section 8 of the Real Estate Settlement Procedures Act (RESPA). No Realtor, or any other party to the transaction, may receive ANYTHING of value for the referral of business. Realtors may, in the course of business, refer a buyer to one or more trusted or reliable lenders, but accptance of a fee or gratuity for any sort of referral is strictly illegal and subjct to federal prosecution.
0 votes Thank Flag Link Sat Apr 19, 2008
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