Question

A real estate broker discusses a buyer's mortgage needs with her, advising her of the types of loans available for her particular circumstances and suggesting a lender who might accommodate her needs. The agent even enters the buyer's information into a computerized system to help the lender provide the type of financing needed. Which of the following is true regarding payment of a fee by the lender to the real estate broker?

A) The lender is not allowed to pay any fees to the broker.
B) The payment of a fee by the lender to the broker is prohibited by law.
C) The lender can pay a fee to the broker for their services.
D) The broker is responsible for paying a fee to the lender.

Answer 1

A lender is not allowed to pay fees to a real estate broker for referring a buyer, according to the Real Estate Settlement Procedures Act, which prohibits such kickbacks. The broker is typically compensated by the buyer or seller, not directly by the lender.

Step-by-step explanation:

When a real estate broker assists a buyer with mortgage needs and suggests a lender, the question at hand is whether the lender can reward the broker for their services. According to the Real Estate Settlement Procedures Act (RESPA), any payment that is made from the lender to the broker for referral services is considered a kickback, which is illegal. Therefore, option A (The lender is not allowed to pay any fees to the broker) and option B (The payment of a fee by the lender to the broker is prohibited by law) would be the correct answers. The law intends to prevent potential conflicts of interest that could result in consumers paying higher costs for their mortgages. It's crucial to remember that the broker gets their compensation from the buyer or the seller, depending on the terms of the agency agreement, not directly from the lender.