September 21st, 2011 7:56 AM by Lehel S.
A REAL estate agent recommends two mortgage brokers whom she describes as experienced in closing loans. You go to the first one, and don’t bother shopping around on rates or fees.
That may or may not be a good choice. Either way, you have a right to be informed of any business relationship between the real estate agent and the mortgage broker.
A federal law passed in 1974, and updated with new rules in January 2010, prohibits referral fees, sharing fees (known as “fee splitting”), or giving anything of value, in any mortgage that could end up being sold to Fannie Mae or Freddie Mac, or being underwritten or guaranteed by other federal agencies. Called the Real Estate Settlement Procedures Act, or Respa, the law also requires disclosures of affiliated or shared ownership businesses and a good-faith estimate on closing costs.
“If that real estate agent refers to me, it’s a violation of Respa for me to even take that real estate agent out to lunch,” said Irene Amato, the president of the A.S.A.P. Mortgage Corporation, a mortgage broker in Cortland Manor, N.Y.
When you receive a recommendation for mortgage bankers or brokers, you still need to do your homework, Ms. Amato said. Ask if the real estate and mortgage companies are affiliated. Meet the brokers or bankers in person, if possible, and ask about their professional background and credentials. Find out whether they handle mostly sales and mortgage originations or have broader experience and knowledge of underwriting and mortgage programs, Ms. Amato said. “What are they going to do for the borrower different than someone else?”
Consider, too, how much experience your real estate agent has. “If they don’t have much, what can you expect?” said Mark Yecies, a co-owner of SunQuest Funding in Cranford, N.J.
Although it is illegal to pay for referrals, that doesn’t stop them from being made — sometimes for old friends, experienced professionals or related companies.
It’s worthwhile to know why the referral is being made. Is it because the company is affiliated to the agency? Or because the mortgage professional has a great track record of closing deals? These are important questions, said Gene Tricozzi, the president of the Northern Funding Corporation in Clifton Park, N.Y., and a past president of the New York Association of Mortgage Brokers.
When he is referred to a potential customer, Mr. Tricozzi said, he sees it as a “pat on the back” and an endorsement of his expertise.
Sometimes, though, as Mr. Yecies pointed out, real estate companies that run in-house mortgage brokerages are trying for a second profit center on one purchase, and thereby keep independent mortgage brokers out of the running.
“The buyer is immediately shepherded into the financial-services side of the business,” and sometimes made to feel as if he or she must use that vendor, he said.
“Sometimes people are not getting a competitive rate,” he added. Other times, they may end up with a house above their price range. Ask yourself, he said, “whose best interests are really being protected?”
That said, there can be advantages to the “one-stop shopping” approach, said George S. Wonica, a real estate broker and a mortgage originator at Wonica Realtors & Appraisers on Staten Island.
Because he knows the client already, he said, he feels the all-in-one business can create “seamless information” and an easier time of getting the mortgage. “A lot of our customers feel it’s very comfortable” to work with someone they already know, he added.
John J. Vento, a certified public accountant and financial planner who owns Comprehensive Wealth Management on Staten Island, suggests borrowers “make sure the mortgage broker is working as your broker and looking out for your best interest.”