By Lori Lesko

Some mortgage brokers believe that lenders recruiting and training real estate agents to originate mortgage loans is bad business, leading down a slippery slope toward sham affiliated business arrangements (AfBAs) and RESPA violations.

Besides, many brokers reason, cutting the more experienced and knowledgeable mortgage brokers out of the action will only hurt the consumer – and the industry.

But lenders see advantages in Realtors being able to share in the origination process and believe HUD should make it easier for them to do FHA loans, as well.

Skip Wiley, president of Transcontinental Lending Group in Fort Lauderdale, Fla., has noted,

“One of the growing trends that I believe is not fully understood or accepted by HUD/FHA, is the popularity of the consumer embracing one-stop-shopping services for real estate and mortgage services.”

LoansWorks for Realtors

“Companies like LoanWorks.com (IndyMac) and OnePipeline.com (Everbank), embrace recruiting and training Realtors to originate mortgage loans for their clients,” he said. 

“This trend of one-stop-shopping and its acceptance by the consumer has been documented in several research studies on behalf of the National Association of Realtors (NAR),” Wiley said.

“These studies indicate that the vast majority of consumers love the idea of letting their Realtor take care of every part of the purchase transaction,” he said. “Yet, today it is illegal for a Realtor, or for that matter, any part-time person to work for a FHA/HUD approved lender.”

Yet, due to reduced real estate commissions, the trend today is for many Realtors to add to their reduced real estate income by helping his or her borrower arrange mortgage financing, Wiley said.

FHA loans falter

“This trend will continue — and in light of this trend — HUD should consider eliminating the full-time provision from its guidelines,” he said. “Not eliminating this provision will continue the slow but steady decline in FHA loan origination volume that has taken place over the past decade.”

But Marc Savitt, president of The Mortgage Center in Martinsburg, W. Va. and member of the National Association of Mortgage Brokers (NAMB) board of directors, has a different take.

“With respect to lenders recruiting and training Realtors to originate loans, this is a growing trend,” Savitt said recently. “However, it is also one that does not benefit consumers.

Realtors not ready

“Lenders may be recruiting Realtors, but in most cases, they have very little training and a serious lack of financial knowledge,” he said. “Mortgage brokers are licensed and financially educated professionals.

“Moreover, it is my experience that one-stop shops provide no savings to consumers,” Savitt said. “In fact, they often have higher interest rates and closing costs.

“Furthermore, many consumer groups consider one-stop shops breeding grounds for fraud,” he added.

That’s because “sometimes these relationships are set up as affiliated business arrangements, to capture more business and with little regard for consumer choice,” Savitt said.

Lose-lose situation

And when consumers are locked into bad deals, the brokers are locked out of transactions, he said.

“Brokers are still the choice for most consumers in the market unless they are subjected to unfair and deceptive practices by Realtors and others acting as qualified originators,” Savitt said.

He doesn’t feel his livelihood is threatened by the one-stop-shops – but believes the practice has the potential to give the entire industry a black eye.

“My concern, again, is with the consumer,” Savitt said. “We often refinance well-qualified consumers out of deals they never should have been placed into by real estate agents/originators whose main goal is to get the deal closed, so they can get paid.”

Buyers beware

“Many of them don’t care what kind of deal the buyer gets,” he added.

“These very situations support NAMB’s position on licensing or registration for all originators – including pre- and continuing education,” Savitt said.

 “Having once taught mortgage financing in a real estate school, I can tell you the focus of some is mainly on products – not qualifications,” he said. “These courses in no way prepare or train for originating loans.”

Consumers need to ask themselves: “Is your real estate agent qualified to originate your loan?” Savitt asked. “Are they licensed and educated as mortgage professionals?”

Pipeline to loans

The trend began several years ago.

One of the first to open the door to other real estate professionals was EverBank which in 2002 announced the acquisition of the OnePipeline brand, “the national leader in third-party loan origination technology that allows real estate professionals, homebuilders, financial advisors, insurance agents and others to originate mortgage with the nation’s leading lenders.”

Robert Clements, president of EverBank Financial Corp., said then that “OnePipeline complements EverBank’s core strategy of providing high quality mortgage services to our various business partners.

“Clearly, consumers want a one-stop home buying experience,” Clements said. “With OnePipeline technology, EverBank can now provide consumers its value-added mortgage expertise through real estate and other advisors.”

The more, the merrier

David Broadbent, president of OnePipeline, added, “Consumers have come to rely more and more on guidance from Realtors, financial service professionals and other trusted advisors in obtaining mortgage financing.

“The OnePipeline system continues to represent the ideal compliance solution to allowing these professionals to not only perform these valuable services for homebuyers, but be legally compensated for their work,” he added.

Wendi Allen, president of Red Door Realty of Jacksonville, Fla., told Mortgage Technology in 2004 that she was involved in seven or eight originations with OnePipeline.com.

The additional income was not a factor for her, Allen said. The biggest benefit was control in “not having to wait on other people to finish” the transactions.

EverBank for Everyman

EverBank knows how to present data to meet the criteria of the underwriter and the customer, she said, adding, “I do not hesitate to recommend this mortgage service to any real estate agents seeking to increase their profits and gain greater control of the transaction.”

Jacqueline Behr, a Realtor associate with the Jacksonville, Fla. office of Williams Realty added, “I think EverBank is a good thing. A lot of agents hesitate getting involved because of RESPA, but EverBank has done the right thing making sure users get things done in the proper way.”

In February 2005, columnist Kenneth Harney wrote an article discussing a 2004 NAR strategy to explore multi-service packaging.

“For example, Countrywide Home Loans and MetroCities Mortgage Corp. have created dozens of successful joint ventures with realty brokers that provide customized loan services to home buyer clients, while sharing loan-related revenues with participating brokers,” Harney said.

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