I know I can't pay agents for referrals. Is it a violation of RESPA to have marketing reps generate leads?

Question

I would pay them commission on the loans that close. This seems to be such a gray area. No one seems to have the right answer. I'm a loan officer and I work for a large mortgage company and am looking for new ways to generate leads. I do not want to pay real estate agents because I know thats against the law. But if I have 1099 employees that market for me, is that legal?

Answer 1

You may have as many telemarketers as you desire and the method and how you pay them are up to you.

There are a few liabilities about telephones that you might want to check out before your turn these lead generators loose on the telephone.

There are a few laws governing the payment of certain workers so check with your human relations director about hiring and paying such individuals.

Our lawmakers, in their effort to protect the workers, have taken the spirit of the entrepreneur out of being creative that is a shame.

I find that the good ole fashion way works extremely well for me and that is getting into the street and working my farm watching it grow and getting my loans from that method.

Therefore I am not in violation of the Do Not Call List. I do not disturb anyone during their supper time and school work.

I hope this has been of some use to you, good luck.

"FIGHT ON"

Answer 2

I am also a loan officer. It would not be a violation of RESPA, but likely would be a violation of state laws, depending on your state. You can have 1099 employees who market for you, but they must be licenced as loan officers as well. Anyone who is paid to talk with customers about loans must be licensed as a loan officer. This is different depending on the state you work in but most states have this same requirement, and actually after thinking about it I agree with the law. I would not want untrained and unlicensed people giving information and selling loans.

I have seen several companies who hire 1099 employees, get them licensed, then pay them 15-20% on closed loans. A senior loan officer (you) would make the balance of the split, since you will most likely be doing the work on the loan.

Answer 3

if the the marketers are on your payroll of course you can pay them for the leads they get based on commission. Its illegal to pay agents for referrals and its also a really bad thing for business. You should have agents that send you loans because you have good service and rates. If they sent you clients for a fee then they'd just be waiting for someone to pay them more money. One thing I like to tell agents is if you have a client that you don't think will qualify for a loan send them to me and I'll find them a program they qualify for. That way once you prove yourself on a really hard loan they'll start sending you the a-paper deals as well.

Answer 4

There are ways around everything. I think that is the best way to avoid RESPA laws because they are considered marketing consultants. However, you should consult a good attorney. I know of agents and mortgage companies in the same office that pay desk fees to the brokers. Here is a link to RESPA guidelines.
http://www.aaronline.com/documents/RespaWhtPaper.pdf

Answer 5

As long as they are not quoting rates and programs or making commitment like statements to prospects, then it is probably OK. Its like hiring a telemarketer... You will just have to clear it with your company's legal dept. This is a VERY hot part of hte law now, and likely to get more and more enforcement attention. I think I remember something about being able to pay them per lead, but not restricting it to closed loans...

Answer 6

It's not a grey area if you live in a state that requires loan officers to be licensed. If you are paying them on a closing, then they are a LO. As far as RESPA, I have never heard of anyone getting in trouble for it, but my state requires a license, and I know we can get in trouble for it.

Answer 7

You can't hire real estate agents unless you are a broker.

Just do a good job and you will get business.

Answer 8

I woudl say that it is against the RESPA Laws:

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, (3) payments pursuant to
cooperative brokerage and referral arrangements or agreements between real estate agents and brokers, (4) affiliated business arrangements so long as (A) a disclosure is made of the existence of such an arrangement to the person being referred and, in connection with such referral, such person is provided a written estimate of the charge or range of charges generally made by the provider to which the person is referred (i) in the case of a face-to-face referral or a referral made in writing or by electronic media, at or before the time of the referral (and compliance with this requirement in such case may be evidenced by a notation in a written, electronic, or similar system of records maintained in the regular course of business); (ii) in the case of a referral made by telephone, within 3 business days after the referral by telephone,\1\ (and in such case an abbreviated verbal disclosure of the existence of the arrangement and the fact that a written disclosure will be provided within 3 business days shall be made to the person being referred during the telephone referral); or (iii) in the case of a referral by a lender
(including a referral by a lender to an affiliated lender), at the time
the estimates required under section 2604(c) of this title are provided
(notwithstanding clause (i) or (ii)); and any required written receipt
of such disclosure (without regard to the manner of the disclosure under clause (i), (ii), or (iii)) may be obtained at the closing or settlement
(except that a person making a face-to-face referral who provides the
written disclosure at or before the time of the referral shall attempt
to obtain any required written receipt of such disclosure at such time
and if the person being referred chooses not to acknowledge the receipt of the disclosure at that time, that fact shall be noted in the written,
electronic, or similar system of records maintained in the regular
course of business by the person making the referral), (B) such person
is not required to use any particular provider of settlement services,
and (C) the only thing of value that is received from the arrangement,
other than the payments permitted under this subsection, is a return on
the ownership interest or franchise relationship, or (5) such other
payments or classes of payments or other transfers as are specified in
regulations prescribed by the Secretary, after consultation with the
Attorney General, the Secretary of Veterans Affairs, the Federal Home
Loan Bank Board, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Secretary of
Agriculture. For purposes of the preceding sentence, the following shall
not be considered a violation of clause (4)(B): (i) any arrangement that
requires a buyer, borrower, or seller to pay for the services of an
attorney, credit reporting agency, or real estate appraiser chosen by
the lender to represent the lender's interest in a real estate
transaction, or (ii) any arrangement where an attorney or law firm
represents a client in a real estate transaction and issues or arranges
for the issuance of a policy of title insurance in the transaction
directly as agent or through a separate corporate title insurance agency that may be established by that attorney or law firm and operated as an adjunct to his or its law practice.
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\1\ So in original.
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(d) Penalties for violations; joint and several liability; treble
damages; actions for injunction by Secretary and by State
officials; costs and attorney fees; construction of State laws

(1) Any person or persons who violate the provisions of this section
shall be fined not more than $10,000 or imprisoned for not more than one year, or both.
(2) Any person or persons who violate the prohibitions or
limitations of this section shall be jointly and severally liable to the
person or persons charged for the settlement service involved in the
violation in an amount equal to three times the amount of any charge
paid for such settlement service.
(3) No person or persons shall be liable for a violation of the
provisions of subsection (c)(4)(A) of this section if such person or
persons proves by a preponderance of the evidence that such violation
was not intentional and resulted from a bona fide error notwithstanding
maintenance of procedures that are reasonably adapted to avoid such
error.
(4) The Secretary, the Attorney General of any State, or the
insurance commissioner of any State may bring an action to enjoin
violations of this section.
(5) In any private action brought pursuant to this subsection, the
court may award to the prevailing party the court costs of the action
together with reasonable attorneys fees.
(6) No provision of State law or regulation that imposes more
stringent limitations on affiliated business arrangements shall be
construed as being inconsistent with this section.