Peter Samuel Cugno, chairman and CEO, Secret! University
As published in Scotsman Guide's Residential Edition, May 2005.
As mortgage-loan originators scramble for business, more and more brokers blunder out of the states in which they have licenses and stumble over loan applicants in states where they’re unlicensed. Sometimes, they’ll even actively solicit potential customers or purchase Internet leads with no regard for state licensing. They won’t even think about contacting the secretary of state’s office for authorization to conduct business.
For some reason, clueless mortgage-loan brokers incorrectly feel they can always refer their leads to a licensed, out-of-state mortgage professional and receive “something of value” upon closing. They call it “co-brokering” and have no idea if it’s legal. Any legality issue rarely crosses their minds. They’re in the business to make money, not accept risks, they’ll say. First, they must under-stand Section 8(b) of the Real Estate Settlement Procedures Act (RESPA) and RESPA Chapter 2 Permissible Activities CRP, Title 24, Section 14, Part 3500.
Many regulations exist
All originators should realize that they are in a highly regulated and legislated industry. A few of the most-relevant regulations in our industry include:
-
RESPA, enforced by the U.S. Department of Housing and Urban Development;
-
Truth-in-Lending Act, Equal Credit Opportunity Act and Fair Credit Reporting Act;
-
Gramm Leach Bliley Act or Financial Modernization Act of 1999;
-
Home Mortgage Disclosure Act;
-
Equal Housing Opportunity standards;
-
Fair Lending Notice of the Housing Financial Discrimination Act of 1977.
Various state laws and regulations also apply to mortgage lending. They include rules from the U.S. Treasury, Internal Revenue Service, Federal Reserve Board, Financial Accounting Standards Board, U.S. Equal Employment Opportunity Commission, wage and hours standards as well as state-licensing authorities and civil and criminal statutes.
Still, some brokers think this co-broker thing is perfectly OK. Astonishing.
Page: 1 2 Next
