Why You Don't Have to Give Out Three Business Cards

NO RESPA VIOLATION.

An old rule in the Real Estate Settlement Procedures Act (RESPA) allowed real estate agents to earn a separate fee from the buyer if they helped the buyer "evaluate financing options". Most real estate agents didn't charge this extra fee to buyers and therefore had nothing to be concerned with in this area. However, the agents who did charge this fee to the buyer were required to help the buyer evaluate financing options among many different lenders. Otherwise, the extra fee would have been considered a referral fee. Contrast that old rule with today's RESPA and Dodd-Frank requirements that require real estate agents to be licensed and regulated as mortgage loan originators to earn fees for helping buyers evaluate financing options. In other words:

• The rule requiring you to refer the buyer to multiple lenders only applied in the past IF you were charging the buyer a fee to help the buyer evaluate financing options.
• No such rule exists in today's environment because you can't earn a fee for this type of activity unless you become a licensed loan officer and perform substantive loan origination activities as defined by government regulation. Finally,
• Nothing in RESPA or any other mortgage or real estate regulation prohibits you from referring your clients exclusively to one lender. You're simply not allowed to get paid a fee or something else of value for referring your clients to a mortgage lender. In other words, no referral fees, gift cards, or other gifts or fees can be given to you in exchange for a referral.

This brings us to the second point:

NO LEGAL LIABILITY.

There is no law or regulation that requires you to hand out three or more business cards in order to avoid legal liability. You are legally responsible for your actions as a real estate agent, and the mortgage professional is legally responsible for his/her actions as a mortgage originator. You don't have legal liability for what the lender does, and the lender doesn't have legal liability for what you do. It's that simple. The only way this would not be the case is if you were to conspire with the lender to do some illegal activity together (such as paying or receiving a referral fee). Further, you can't REQUIRE a borrower to get financing through a specific lender. However, you are certainly allowed to refer buyers to your preferred mortgage lender or broker for loan approval (although buyers can get financing from any other source if they desire to do so).