Unlicensed Mortgage Loan Officers

Every home buyer and homeowner to whom I've posed the question of whether or not their mortgage Loan Officer (LO) was "licensed" has had no idea. The assumption by all of them, the general populace and even many real estate agents is that mortgage lenders, and specifically LO's, must SURELY be licensed. Right? Wrong!

In Arizona, only one person in any given firm must be licensed. So theoretically a mortgage lending firm could have one licensed individual broker and yet have a hundred LO's working in the firm ~ accessing confidential information on customers such as social security numbers, bank accounts, tax returns and credit reports, to name a few. So what's wrong with this?

In many cases, perhaps nothing. But in many cases, the abuses by LO's of their customers is staggering, costly and often even fraudulent. With licensing comes a measure of accountability. Without licensing, there's no way of having a clue of exactly how many unlicensed LO's are in Arizona, much less knowing anything about them or their backgrounds. So how does it make you feel to think your LO might have a criminal background? What if you discovered that your LO wasn't capable of passing a minimum mortgage finance exam? What if you found out that your LO didn't obtain the best loan rate and terms for your last home purchase but instead 'sold' you a loan that made her/him the most commission? And those types of questions just begin to scratch the surface.

So when I hear that House Bill 2320 has been introduced, a bill that would require mandatory licensing of ALL loan officers and originators, I want to shout hallelujah! We're way over due, and I support this measure 100%. The Arizona Republic recently published an extensive article on the subject, which I encourage you to read in its entirety.

Thanks!

...randy

Commission Rebates/Splits

I recently received the following "Ask the Broker" question from Tammy, presumably a licensed real estate Agent:

"I was wondering if i sold a home for a 3% commission 679,000 house (my split) but credited back 7900(of my commission) to the seller to give to the buyer through escrow should my broker charge me on the entire 3% when i did not receive a 3% commission. I basically lowered my commission so did not receive a 3%."

The basic issue here is that the commission belongs to the BROKER, not the individual Agent. Many Agents don't realize that, and thus unknowingly or naively treat commissions as their "own." In fact, commissions paid directly to a licensed real estate Agent without going through that Agent's Broker is illegal in Arizona. Thus the full 3% commission Tammy mentioned as being her "split" actually belongs to Tammy's Broker.

That said, whether or not the Broker is willing to forego his/her 'charge' on the $7,900 that an Agent (who in reality is an Agent of the Broker) credited back to the client is a matter between the Agent and his/her Broker. In other words, it's going to depend on whether the Broker's attitude is that 'splits' are based on 'earned' commission or 'realized' commission. I would recommend to Tammy that she first carefully read the Independent Contractor Contract that she signed with her Broker. If the issue is not addressed, she should really contact her Designated Broker, explain the situation, and ask for clarification of his/her policy on commission 'rebates'.

I hope this helps, Tammy. It's a great question that could affect many home Buyers, Sellers and Agents! And regardless of how it works out, we hope you'll let us know how it works out for you.

...randy