Required to be licensed in state of loan to share a commission?
Member since 2022 · 7 posts · 0 votes
Required to be licensed in state of loan to share a commission?
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Hamp Lee IIIPro Member
Real Estate Agent · San Antonio, TX · Member since 2019 · 1k+ posts · 832 votesQuote from @Brian Bohrer:
That is a great question! I do not believe that you have to be licensed in the state of where you sent your referral, but I am not certain.
I will be watching this thread closely to see what the actual answer is as I just earned my MLO license as well, and am very interested in the official ruling.
Thank you for the post!
15 Replies
- Real Estate Agent · Colorado Springs, CO · Member since 2021 · 279 posts · 121 votes3y
That is a great question! I do not believe that you have to be licensed in the state of where you sent your referral, but I am not certain.
I will be watching this thread closely to see what the actual answer is as I just earned my MLO license as well, and am very interested in the official ruling.
Thank you for the post!
- 3yHamp Lee IIIPro MemberReal Estate Agent · San Antonio, TX · Member since 2019 · 1k+ posts · 832 votes
Quote from @Brian Bohrer:
That is a great question! I do not believe that you have to be licensed in the state of where you sent your referral, but I am not certain.
I will be watching this thread closely to see what the actual answer is as I just earned my MLO license as well, and am very interested in the official ruling.
Thank you for the post!
- Rental Property Investor · San Antonio, TX (Lender in TX and SC) · Member since 2020 · 196 posts · 253 votes3y
@Hamp Lee III - thanks for the mention.
@Tony Caputo - Most lenders have an internal LO Referral Desk/Team. If you have a borrower purchasing in a state you're not licensed in, you can loop in the Referral Desk, they will connect the borrower with an LO from your company that is licensed in that state, and you can receive a portion of the commission once the loan closes.
- Member since 2022 · 7 posts · 0 votes3y
Quote from @Joel Allen:
@Hamp Lee III - thanks for the mention.
@Tony Caputo - Most lenders have an internal LO Referral Desk/Team. If you have a borrower purchasing in a state you're not licensed in, you can loop in the Referral Desk, they will connect the borrower with an LO from your company that is licensed in that state, and you can receive a portion of the commission once the loan closes.
Let's assume this is not the case in this situation. Totally separate company. Is it required that an agent from the company be licensed in that state?
- 3yDevin PetersonBusiness MemberLender · Sarasota, FL · Member since 2022 · 2k+ posts · 695 votes
All contingent on the lender/broker. Some banks have referral programs. If you are in this scenario and you are an MLO I encourage you to think about it this way:
1. Would you benefit greater from establishing a new connection with another lender/broker partner who can possibly give you another lead in your area in the future
2. Is the small referral fee really that much to you? Most referral fees are around $500 from my experience.
When I find myself in this scenario, I usually just give the lead to make a new connection. Most of the times, something great will come my way in return down the road worth more than $500 referral fee. It pays to be humble and patient, especially in lending.
ProAlpha Capital55 Reviews - Member since 2022 · 7 posts · 0 votes3y
Quote from @Devin Peterson:
All contingent on the lender/broker. Some banks have referral programs. If you are in this scenario and you are an MLO I encourage you to think about it this way:
1. Would you benefit greater from establishing a new connection with another lender/broker partner who can possibly give you another lead in your area in the future
2. Is the small referral fee really that much to you? Most referral fees are around $500 from my experience.
When I find myself in this scenario, I usually just give the lead to make a new connection. Most of the times, something great will come my way in return down the road worth more than $500 referral fee. It pays to be humble and patient, especially in lending.
1. No
2. Yes
Let's assume, just for argument's sake, that my entire business or nearly my entire business is referring people to other lenders, most of which will be in a state other than mine. And that there will be hundreds to thousands of referrals each year for which I would like to be compensated and just want to know whether I need to become licensed in all 50 states in order to be compensated through commission sharing.
- 3yDevin PetersonBusiness MemberLender · Sarasota, FL · Member since 2022 · 2k+ posts · 695 votes
Quote from @Tony Caputo:
Quote from @Devin Peterson:
All contingent on the lender/broker. Some banks have referral programs. If you are in this scenario and you are an MLO I encourage you to think about it this way:
1. Would you benefit greater from establishing a new connection with another lender/broker partner who can possibly give you another lead in your area in the future
2. Is the small referral fee really that much to you? Most referral fees are around $500 from my experience.
When I find myself in this scenario, I usually just give the lead to make a new connection. Most of the times, something great will come my way in return down the road worth more than $500 referral fee. It pays to be humble and patient, especially in lending.
1. No
2. Yes
Let's assume, just for argument's sake, that my entire business or nearly my entire business is referring people to other lenders, most of which will be in a state other than mine. And that there will be hundreds to thousands of referrals each year for which I would like to be compensated and just want to know whether I need to become licensed in all 50 states in order to be compensated through commission sharing.
No, Not at all. Its kind of sounds like wholesaling for lenders what you're doing! Lol - But it will really all depend if the other bank or lender agrees to it. They really set the price. A better way to do this would be to get your lead/borrower to sign a compensation agreement that states "so and so has agreed that Company ABC has earned X commission fee based off loan amount of the transaction involving 1234 Street to be paid for at closing." then title will cut you a check.
BE CAREFUL -> you can create a bad rep for yourself if you just charge referral fees to borrowers for without telling them what you're doing.
ProAlpha Capital55 Reviews - Real Estate Broker · New York, NY · Member since 2020 · 2k+ posts · 1k+ votes3y
Hey @Tony Caputo - I haven't heard anything like that with my LO friends here in NYC that often refer business out. It's the same as agents that refer business out to other agents in different states, we make a referral fee that's about 25% of the total commission the other agent would have gotten.
- Member since 2022 · 7 posts · 0 votes3y
Quote from @Devin Peterson:
Quote from @Tony Caputo:
Quote from @Devin Peterson:
All contingent on the lender/broker. Some banks have referral programs. If you are in this scenario and you are an MLO I encourage you to think about it this way:
1. Would you benefit greater from establishing a new connection with another lender/broker partner who can possibly give you another lead in your area in the future
2. Is the small referral fee really that much to you? Most referral fees are around $500 from my experience.
When I find myself in this scenario, I usually just give the lead to make a new connection. Most of the times, something great will come my way in return down the road worth more than $500 referral fee. It pays to be humble and patient, especially in lending.
1. No
2. Yes
Let's assume, just for argument's sake, that my entire business or nearly my entire business is referring people to other lenders, most of which will be in a state other than mine. And that there will be hundreds to thousands of referrals each year for which I would like to be compensated and just want to know whether I need to become licensed in all 50 states in order to be compensated through commission sharing.
No, Not at all. Its kind of sounds like wholesaling for lenders what you're doing! Lol - But it will really all depend if the other bank or lender agrees to it. They really set the price. A better way to do this would be to get your lead/borrower to sign a compensation agreement that states "so and so has agreed that Company ABC has earned X commission fee based off loan amount of the transaction involving 1234 Street to be paid for at closing." then title will cut you a check.
BE CAREFUL -> you can create a bad rep for yourself if you just charge referral fees to borrowers for without telling them what you're doing.
Disclosure won't be an issue, very transparent. Let's assume the other lenders agree to it, perhaps a 20% or 25% or whatever cut for the referral.
I know it's not legal to share that commission with someone that is not a licensed loan officer. I just want to know if they have to be licensed in the state of the loan in order to share the commission.
- Member since 2022 · 7 posts · 0 votes3y
Quote from @Mohammed Rahman:
Hey @Tony Caputo - I haven't heard anything like that with my LO friends here in NYC that often refer business out. It's the same as agents that refer business out to other agents in different states, we make a referral fee that's about 25% of the total commission the other agent would have gotten.
I'm not sure what you're saying. Are you saying that when you refer business out of New York State, you can still share the commission no problem?
- Real Estate Broker · New York, NY · Member since 2020 · 2k+ posts · 1k+ votes3y
Yes @Tony Caputo - as a real estate agent, if I refer a qualified and ready lead to another agent both in-state and OOS, we will agree on what the referral fee is beforehand (usually 25% of the whatever commission the new agent makes).
- Member since 2022 · 7 posts · 0 votes3y
Quote from @Mohammed Rahman:
Yes @Tony Caputo - as a real estate agent, if I refer a qualified and ready lead to another agent both in-state and OOS, we will agree on what the referral fee is beforehand (usually 25% of the whatever commission the new agent makes).
I think that's a little different as a realtor than a loan officer so I'm not sure your experience applies to this question, but thank you for sharing it.
- 3yDevin PetersonBusiness MemberLender · Sarasota, FL · Member since 2022 · 2k+ posts · 695 votes
Quote from @Tony Caputo:
Quote from @Devin Peterson:
Quote from @Tony Caputo:
Quote from @Devin Peterson:
All contingent on the lender/broker. Some banks have referral programs. If you are in this scenario and you are an MLO I encourage you to think about it this way:
1. Would you benefit greater from establishing a new connection with another lender/broker partner who can possibly give you another lead in your area in the future
2. Is the small referral fee really that much to you? Most referral fees are around $500 from my experience.
When I find myself in this scenario, I usually just give the lead to make a new connection. Most of the times, something great will come my way in return down the road worth more than $500 referral fee. It pays to be humble and patient, especially in lending.
1. No
2. Yes
Let's assume, just for argument's sake, that my entire business or nearly my entire business is referring people to other lenders, most of which will be in a state other than mine. And that there will be hundreds to thousands of referrals each year for which I would like to be compensated and just want to know whether I need to become licensed in all 50 states in order to be compensated through commission sharing.
No, Not at all. Its kind of sounds like wholesaling for lenders what you're doing! Lol - But it will really all depend if the other bank or lender agrees to it. They really set the price. A better way to do this would be to get your lead/borrower to sign a compensation agreement that states "so and so has agreed that Company ABC has earned X commission fee based off loan amount of the transaction involving 1234 Street to be paid for at closing." then title will cut you a check.
BE CAREFUL -> you can create a bad rep for yourself if you just charge referral fees to borrowers for without telling them what you're doing.
Disclosure won't be an issue, very transparent. Let's assume the other lenders agree to it, perhaps a 20% or 25% or whatever cut for the referral.
I know it's not legal to share that commission with someone that is not a licensed loan officer. I just want to know if they have to be licensed in the state of the loan in order to share the commission.
Negative! They do not
ProAlpha Capital55 Reviews - Member since 2022 · 7 posts · 0 votes3y
Quote from @Devin Peterson:
Quote from @Tony Caputo:
Quote from @Devin Peterson:
Quote from @Tony Caputo:
Quote from @Devin Peterson:
All contingent on the lender/broker. Some banks have referral programs. If you are in this scenario and you are an MLO I encourage you to think about it this way:
1. Would you benefit greater from establishing a new connection with another lender/broker partner who can possibly give you another lead in your area in the future
2. Is the small referral fee really that much to you? Most referral fees are around $500 from my experience.
When I find myself in this scenario, I usually just give the lead to make a new connection. Most of the times, something great will come my way in return down the road worth more than $500 referral fee. It pays to be humble and patient, especially in lending.
1. No
2. Yes
Let's assume, just for argument's sake, that my entire business or nearly my entire business is referring people to other lenders, most of which will be in a state other than mine. And that there will be hundreds to thousands of referrals each year for which I would like to be compensated and just want to know whether I need to become licensed in all 50 states in order to be compensated through commission sharing.
No, Not at all. Its kind of sounds like wholesaling for lenders what you're doing! Lol - But it will really all depend if the other bank or lender agrees to it. They really set the price. A better way to do this would be to get your lead/borrower to sign a compensation agreement that states "so and so has agreed that Company ABC has earned X commission fee based off loan amount of the transaction involving 1234 Street to be paid for at closing." then title will cut you a check.
BE CAREFUL -> you can create a bad rep for yourself if you just charge referral fees to borrowers for without telling them what you're doing.
Disclosure won't be an issue, very transparent. Let's assume the other lenders agree to it, perhaps a 20% or 25% or whatever cut for the referral.
I know it's not legal to share that commission with someone that is not a licensed loan officer. I just want to know if they have to be licensed in the state of the loan in order to share the commission.
Negative! They do not
Thank you!
Realtors can, Loan Officers can not. It is against RESPA to receive a commission unless services were provided. My advice would be to create relationships and go for a win-win approach. You send a deal to a lender you speak with, build some rapport, and maybe they send something your way one day. It does not always work out, but that is best path.
"RESPA Section 8(a) prohibits kickbacks for business referrals related to or part of settlement
services involving federally related mortgage loans. 12 USC § 2607(a); 12 CFR § 1024.14(b).RESPA Section 8(b) prohibits unearned fee arrangements, i.e., splitting charges made or
received for settlement services, except for services actually performed, in connection with
federally related mortgage loan transactions. 12 USC § 2607(b); 12 CFR § 1024.14(c)."
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