Question

John is a Mortgage Loan Originator in Charlotte, North Carolina. Fred is a Mortgage Loan Originator in Florida. Fred called John and told him that he had a past client moving to the Charlotte area. Fred took the application and offered to give it and the referral of his customers to John for a 50

1) Yes. Two licensed Mortgage Loan Originators can split a commission, even if they are licensed in different states.
2) Yes. Fred has worked on the loan by taking the application. Therefore it does not violate RESPA. It is found business and John should do it.
3) No. This is a violation of The Real Estate Settlement Procedures Act. John can take the referral but cannot pay Fred because Fred has not done enough by the Department of Housing and Urban Development rules to get paid.
4) Both A and B.

Answer 1

The legality of Mortgage Loan Originators in different states sharing a commission involves complex considerations under the Real Estate Settlement Procedures Act (RESPA). While commission splits are allowed when both parties contribute to the loan origination process, a simple referral may not qualify under HUD's rules. John must ensure any commission sharing with Fred complies with these regulations.

Step-by-step explanation:

The question pertains to a real estate transaction between two Mortgage Loan Originators (MLOs) from different states. Specifically, the query is about the legality of sharing commissions and referrals under the Real Estate Settlement Procedures Act (RESPA). RESPA prohibits certain practices that can lead to increased costs for homebuyers. In the context provided, where Fred wants to refer a client and share the commission with John, this could potentially be considered a kickback under RESPA rules, which is illegal.

RESPA allows for commission splits between MLOs within the same transaction, but both must have provided a service for the loan origination. If Fred took substantial steps beyond mere referral, such as completing the loan application, underwriting, and processing the loan, then it may be lawful for him to receive part of the commission. However, simply referring a client and passing along the application without taking part in the actual transaction may not be enough, and therefore could lead to a RESPA violation.

It is critical for John to ensure any commission split complies with RESPA and HUD guidelines to avoid any legal repercussions. This might include documenting the services provided by each party. As professionals, they must adhere strictly to federal laws governing real estate transactions.