SAN DIEGO - Mortgage bankers may soon be approached by real estate agents seeking payments in exchange for steering borrowers their way, a leading industry analyst says.
The practice could result from federal legislators' failure to clarify a key section of the Real Estate Settlement Practices Act this year, said Brian J. Chappelle, staff vice president with the Mortgage Bankers Association of America.
The way matters currently stand, real estate agents could provide a series of services, such as taking loan applications, and expect a payment of several hundred dollars from mortgage brokers, said Mr. Chappelle, speaking at the MBA's annual conference.
The arrangement could end up "corrupting" the lending process, he said.
The possibility does not sit well with the MBA or its members. "We don't want to get into the business of paying referral fees," said one executive at a Midwest mortgage bank who declined to be named.
But bankers may end up in a bind. Industry experts say the Department of Housing and Urban Development set the wheels in motion to legitimize fees earlier this year through letters to the Independent Bankers Association of America.
The letters - responses to IBAA requests for guidance about agent relationships - outlined 15 services and said agents could receive referral fees for performing any five of those for a borrower.
The measures include prequalifying borrowers, ordering appraisals and verifications of employment, and participating in closings.
The allowance could be significant because homebuyers often look to their real estate agents to recommend a lender.
But Mr. Chappelle added that the industry must be realistic, and that some mortgage bankers may go along. "There will always be someone willing to pay the fee" in return for more leads, he said.
While HUD's intentions are sincere, the permissive approach "really could have a significant impact on the landscape," Mr. Chappelle said.
Mortgage bankers have some protection against an onslaught of referral requests, since many states have their own laws that limit or prohibit referral fees.
That may be mortgage bankers' best recourse, because efforts to get clarification from HUD or action from legislators do not appear to be on the agenda this year. "There is not a lot of sentiment in Washington for getting things changed," Mr. Chappelle said. "Right now there's not a lot of support in Congress."
As a result, this is something mortgage bankers will have to live with, he said. "We want to make sure our members are aware of this."