Would splitting a rate buy-down fee with a broker be considered a Section 8 violation?

IMO yes. What did the broker do to earn the split?

The broker typically assists the customer complete their application, pulls credit, provides initial disclosures and collects supporting documentation for underwriting (pay stubs, tax return, etc)

We have a similar situation surrounding Section 8 of RESPA and Broker fees. Scenario is this: borrower submits an application through broker #1. Broker #1 pulls credit and provides initial disclosures, collects supporting documentation, and does preliminary underwriting. Broker #1 presents loan package to Broker #2. Broker #2 underwrites the loan to ensure it fits withing our Banks Lending Policy and re-issues disclosures. Broker #2 presents loan file to our Bank. Both Broker #1 and Broker #2 request a broker fee.

Since Broker #2 is not accepting the application from the borrower, it is my understanding that compensation to them can not occur regardless of whether they complete at least 5 of the requirements to earn a fee. Broker #2 suggested, provide Broker #1 with a 1.5% broker fee and Broker #2 will recoup there fee as a seperate transaction, which I am not comfortable with either.

But what does that have to do with the applicant choosing the option to pay for a rate buy down?

Why would broker #1 submit to broker #2 instead of directly to you? Broker #2 cannot be paid for duplicate work.


As I have said many times I am so thankful we don't deal with brokers!!!

Dan...I wish we could say the same!!!

Broker #2 works for an affiliate of the Bank. As I understand it, all broker deals go through this Broker to save time for our Loan Officers, meaning management doesn't want our LO to be bogged down with underwriting all broker deals coming in. So we use this broker to sort out the good and the bad.

This sounds more like broker #2 is an underwriting agent for your bank. If that's the case I would say you could compensate them for their work. However I would say it should be a flat underwriting fee for each transaction they underwrite and not a percentage of the loan amount, nor dependent on if the transaction is approved or denied. Check your contract with broker #2.

Perfect...Thank you so very much Dan!!