Comments on: Fee Splitting

By: Elisa Wu

Elisa Wu — Sun, 28 Feb 2010 07:50:42 +0000

As a consumer, I wouldn’t give a chance to the broker or licensed LO, needless to say to give a chance to the unlicensed LO. It’s just doesn’t make sense; It sounds illegal and why should I use an unlicensed LO who then use a licensed LO, logically, it’s silly. Of course, I definitely won’t give them a chance to share the fee splitting since the money comes from my pocket.

By: mf

mf — Sun, 30 Aug 2009 19:17:44 +0000

Hi Greg,

Thanks for calling. We just talked on the phone. Lending Tree has a detailed page on their website with all their licensing information:

http://www.lendingtree.com/legal/license-disclosures/

Carefully read the paragraph titled “fees.”

LendingTree is offering an arguably different service compared with a person who refers a consumer to a mortgage broker and wants a kickback for doing nothing but passing on the referral.

By: Greg Forkin

Greg Forkin — Sun, 30 Aug 2009 19:04:34 +0000

What about Lendintree.com? They get paid approximently $10 up front for the mortgage lead and a percentage when it closes. Is this legal.

By: Ross Palmer

Ross Palmer — Fri, 31 Jul 2009 01:28:52 +0000

As a loan originator I understand that this is illegal and against everything RESPA stands for. At my company this is grounds for termination, we do not split fees with anyone, or even offer the subject. I think the new rules coming into effect tomorrow will eliminate this, as everyone will now have to be licensed to originate even if they are working for a Consumer Loan Company. The people who choose to break the rules should have their license taken away.

By: Melissa Morgan

Melissa Morgan — Sun, 21 Jun 2009 01:50:53 +0000

Even though I have always fallen under the umbrella of working for a bank and not being required to be licensed I have always felt there should be no umbrellas or loop holes. If you are originating and closing mortgage transactions there should be a license required with continuing education with no exceptions.

I adamantly expressed to the loan officers I managed that it is your career and reputation let alone the possible losses and penalties the bank would face that is at risk.

One or two loan fees earned is not worth risking all of this.

By: Joe Dahleen

Joe Dahleen — Thu, 14 May 2009 15:04:40 +0000

The unlicensed Loan Originator needs to be licensed to get a part of the upfront agreed to fee accepted by the consumer.
If it was disclosures and the unlicensed was licensed then it would be ok.

But no unlicensed LO should never be able to receive anything out to the transaction. If the consumer wanted to pay the unlicensed LO outside of the transaction then that is up to the consumer.

By: Raylene Ramos

Raylene Ramos — Thu, 23 Apr 2009 21:14:29 +0000

First of all, this action is illegal and with the company I work for, we have to be licensed and fee splitting is not allowed. As a consumer, as long as I wasn’t paying extra for the fees, it wouldn’t really matter to me if the fee was split. As the lender, Im sure the lender would have no knowledge of such an agreement. The licensed LO would be putting his/her career in jeopardy.

By: Mary McGraw

Mary McGraw — Wed, 22 Apr 2009 00:04:08 +0000

The LO that is licensed shoud know better. That is unethical no matter how you try and swing. If you get your appropriate licensed then you would know it. Unfortunately people try to cheat the system and eventially they will get caught and honestly that is not worth it. This kind of action is why people dont trust..I originally read the question wrong. So get your own license then you do not have to “ask” someone to do something they should not be doing.

By: Mary McGraw

Mary McGraw — Tue, 21 Apr 2009 22:18:53 +0000

it wouldnt really matter to me as long as they were doing the right thing and it was legal. Also that they were doing the right thing for me. I would hope that i could trust in what they said.

By: Terry Birkland

Terry Birkland — Fri, 03 Apr 2009 23:11:39 +0000

Since I’m new to the business I thought from the beginning that I could not give or receive part of my compensation to a third party. I don’t know why two LOs who work for the same broker could not work jointly on a file and split the compensation. Tell me if I’m wrong about this. Even if was legal I would not pay third parties any kind of split. I did have a Wells Fargo LO offer to process my business during the summer boating season but we did not discuss compensation. I wasn’t interested even if it was legit.

By: William Platts

William Platts — Fri, 27 Feb 2009 16:57:21 +0000

I have seen more of this fee splitting in the following scenario than any other:LO #1 also has a real estate license so he is unable in our state to originate HUDS/VA’s so he has it run through another LO who is qualified for those originations. I don’t have a lot of time logged as an LO, with that being said I have not scene an unlicensed LO splitting fees on referred loan originations. I really don’t see a lot wrong in these fee splitting scenarios if the fiduciary responsibilities are maintained to the consumer, ie, no raising fees because there is a split involved and total transparency to the consumer of why there is fee splitting taking place. However if the fee splitting is an official violation of regs/laws it should be curtailed. I would not agree with a “blanket” no fee splitting policy”; vacations, illness and a variety of other situations may create the legitimate need to split fees with another competent LO. Further more you may as a new LO run into a particular loan product you may not be fully competant to do the consumer a perfect job and need some assistance from a more experienced LO thus creating a obligation to compensate your mentor. The truth is your employer/broker is not always doing the training and mentoring they should be doing.

By: Teresa Tait

Teresa Tait — Sun, 08 Feb 2009 03:21:08 +0000

I personally do not have a problem with fee splitting among Licensed Loan Originators as long as the arrangement is disclosed to the client.There are times when 2 perspectives can benefit the client. However, there should never be additional fees charged. This arrangement works very well in situations where new LO’S require alot of hands on assistance and helps insure that the client is getting the very best service.

By: Vladislav Baydovskiy

Vladislav Baydovskiy — Mon, 02 Feb 2009 03:03:34 +0000

As a consumer I would not care if the fee would be split. I would only care if the fee would be increased in order to cover 2 people, instead of 1. As long as my instrests would be at heart, i think there should be issue with this.

By: Beth Damery

Beth Damery — Wed, 28 Jan 2009 18:44:40 +0000

It seems to me that fee splitting between two licensed loan officers can be a very good arrangement if used wisely. Working as a team when both LO’s are involved with the client is win, win for all parties.
Clients, when treated fairly and ethically, have never questioned this practice.

By: Laurie Morgan

Laurie Morgan — Wed, 28 Jan 2009 18:38:37 +0000

Fee splitting is allowed in our office with in our company for training purposes. Never do we raise a fee to compensate another loan officer. This is done for training purpose, to ensure that jr. LO’s who are entering the field are trained correctly and that the trainer is compensated as well.

That said I believe in disclosing how the pay works to people and have never had it questions.

Also I should say that our company holds a consumer loan license so we are not required to be licensed, but I choose to keep my license non active and current.

By: Mila Usher

Mila Usher — Sun, 04 Jan 2009 18:17:56 +0000

I guess if everything is done in fairness and the good of all parties included fee spliting wouldn’t be a bad thing. But then again I don’t really understand the structure.

By: Mila Usher

Mila Usher — Sat, 03 Jan 2009 17:02:51 +0000

I have never really understood the whole fee spliting thing. I don’t even know how it works. My company doesn’t use a fee structure fore paying their agents or brokers.

By: mf

mf — Wed, 31 Dec 2008 04:38:29 +0000

@Mike,

“It is possible for a loan officer to charge a point and then divide the split based on the agreement with the source loan officer.”

Do you mean within the same company?
Two people working together under the same broker? I suppose this may happen.

However, if it’s two people working at two different companies, no this is not allowed as per state and federal law.

Jillayne

By: Mike Vandenbos

Mike Vandenbos — Wed, 31 Dec 2008 04:21:51 +0000

Fee splitting is ethical as long as the loan officer closing the loan does not raise the fee to include a referral fee for the loan officer who sourced the lead. It is possible for a loan officer to charge a point and then divide the split based on the agreement with the source loan officer.

The implications for the loan officer closing the loan is that they are foregoing the opportunity costs of closing a loan in which they would receive the whole commission.

I think the RESPA guideline that prevents referral spiffs is necessary and protects the client. The exception would be if the loan officer includes a disclosure that notifies the borrower of the relationship.

If I was the consumer I would hold to my financial objectives regarding closing costs. If the loan officer met those, I would not be concerned about how the commission is split.

By: Kent Kiser

Kent Kiser — Tue, 30 Dec 2008 20:02:28 +0000

I have never seen this practice but have heard of it. It would seem to me that being licensed is the best avenue and should be considered the only option. Being “messy” in this case seems to serve no purpose.
What would seem to happen would be that the consumer would end up with many questions that couldn’t be prudently answered.

By: Mark Johnson

Mark Johnson — Tue, 30 Dec 2008 17:13:05 +0000

A person should be licensed if he/she receives a fee. And it should be discloses to the borrower. I don’t have a problem if a licensed L.O. wants to share as long as it is disclosed and to make sure that the L.O. isn’t chargeing excessive fees.

By: Bartholomew Henning

Bartholomew Henning — Mon, 29 Dec 2008 23:00:37 +0000

Honestly, I wouldn’t care either if I was a consumer. But, on the industry side, it could lead to wrong behaviors. Such as the unlicensed LO putting a stop because the licensed LO isn’t making enough $$$. I think a simple disclosure to the borrower would be sufficient.

By: Benjamin Bergsma

Benjamin Bergsma — Mon, 29 Dec 2008 22:09:10 +0000

The LO would havce a definate problem with the state licensing board togehter with a RESPA violation. The unlicenses LO would, I nbelieve, have similar problems. The broker would be subjest to possibly loosing his license.
The consumer should have the right to know all of the consequesces and take part in hte decision also. If I were the consumer, I would definately be against it.

By: Yoshiho Takamoto

Yoshiho Takamoto — Sat, 20 Dec 2008 09:48:57 +0000

I can totally relate to this story because reacently, similar thing happened to me. I had a referral from a friend who works for a bank, specialized in commercial loan. She referred a client who was interested in doing a residential refi. Her husband works for the same mortgage broker with me but he also has 2 other jobs and he was busy. Therefore, she wanted me to take care of this client. However, when she referred this client, she ask me to give her husband a ‘cut’ since he would have been working on this file if he had the time. Then I remembered the materials I studied for my licensing and it was in violation of RESPA. I told her I would not be able to give her any ‘cut’ because it is illegal. Since she never studied RESPA she did not know. She was unhappy at first but she realized it is in violation of law, she understood where I was coming from. I know there are still many people who work in this industry who does not know the law or they know but they decide to be in violation for it. I know I studied for my license and I will continue to inform and educate the people who ask me to break the law.

By: Tom Strain

Tom Strain — Tue, 16 Dec 2008 21:52:20 +0000

The consequences are plain- it is a violation of Respa to fee split and you could end up losing your license. I beleive one thing RESPa is accomplishing is attempting to prevent kickbacks or refferals for a fee to a number of various parties who are not neccessarily qualified to recieve a fee or by doing so may increase the cost of the loan to the customer. IE real estate agent, attorney, title rep, appraisor, friend. May want to call themselves an (unlicensed) L.O. so they can get in on a deal.

I believe all L.o.’s should be licensed weather you work as a broker or at a bank. There needs to be a level of professionalism in placefor identifying who qualifies and understands the duties and fiduciary responsibliies of the job. Also it is a means to hold people accountable and weed out those who do not qualify because of their past record and behavior.

Customers want to know the fees of a loan. As to how its broken out I dont think it matters to them as long as they know how much. They don’t want to be over charged.