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#793544 - 08/13/07 05:14 PM Broker fees
VRV Offline
100 Club
Joined: Jun 2007
Posts: 173
I have received what seems to be an unusual request, and I would love to have your thoughts on this. We have some circumstances in which we take an application, but we can't approve the loan due to credit issues, so we pass the request to a third party (Party A)for them to consider. We would receive a broker fee from Party A in this situation if Party A approves the loan and it would be shown on the HUD-1 as a Lender Paid POC broker fee. On rare occasions, Party A cannot close the loan in their name, so they are passing it along to Party B. If Party B closes the loan, Party B will pay Party A a broker fee and this will show as a Lender Paid POC broker fee on the HUD-1. The problem is that, in these circumstances, PArty B will not close the loan with more than one broker fee being shown on the HUD-1. In other words, Party B does not want to show the broker fee being paid to us on the HUD-1. They want to limit it to the broker fee they are paying to Party A. Is this acceptable since PArty B is closing the loan, and the only broker fee they are paying is to Party A. Would it be acceptable for the fee Party A pays to us to be excluded from the HUD-1? They are suggesting it just be invoiced and paid separately from the closing transaction documents. Am I overlooking any RESPA problems with this proposal? Thanks.

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Lending Compliance
#793852 - 08/13/07 10:28 PM Re: Broker fees VRV
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,220
Galveston, TX
Sounds like a potential for feee splitting. Are both you and the broker geting part of the fee and are you both meeting the broker fee requirements?
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#793885 - 08/13/07 11:40 PM Re: Broker fees rlcarey
VRV Offline
100 Club
Joined: Jun 2007
Posts: 173
I have the same concern, i.e., fee splitting, but the line of business states that we do all the ordinary work that would entitle us to a broker fee (e.g., taking application, obtaining credit report and appraisal, etc.). I am further advised that Party A also does the requisite work in order to earn a broker fee, but it seems to me as though they are simply duplicating the work we have already done. For example, they order another credit report, even though we already did that. I don't know exactly what other duties they perform, but it doesn't seem as though they could really be doing much substantive work of value, since we would already have done basically everything that needed to be done. The line of business is presenting this as though Party B is paying the broker fee to PArty A, and Party A is paying us for the services we rendered, but I can certainly see someone making a successful argument that the broker fee is really being split between us and Party A.

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