Is it possible to make referral commission recommending a lender?

Question

Hello BP world. I know you can receive a commission as a real estate agent / broker if you have a license and refer business to someone, but does the same rule apply to mortgage lenders/brokers.

Example - you have a lenders license and know someone ready to buy a house, you refer them to another lender - can you be paid some finders fee in this example?

Thanks

James Hamling · Answer

@Jonathan Farber there is a mountain of details, variables, where it can become a very VERY long "well maybe if" conversation but I will just fast track this to what matters.

Short-short version is it's all sizzle and no steak. You'd be doing all kinds of gymnastics to ultimately capture a very small amount of $, making a very poor ROI.

BUT, there is other ways to approach it that IS a good ROI. For example, a quid-pro-quo type relationship. For example, I have one lender I have worked with for years because he is legitimately the best resource for any of my retail buyers. He refers me clients whenever get's the chance in like kind, I never asked for this, we have no contract for it, he legitimately knows I am an amazing rock-star of Real Estate so there is that, but see, that's far more valuable than any tiny kick-back $.

And now both him and one of my other lenders want to do some JV-type lead programs, in which they will pipeline new clients directly to me.

That's the correct, most efficient, simple and profitable way to do this with lenders.

Again, they are not forced to do this, they just do it because I am damn good at what I do, so why wouldn't they want the best for there clients, only closed business = $ right. And same for myself, I want the best for my clients because only closed business = $.

Clayton Silva · Answer

Hey Jonathan, short answer: depends. For any conventional lending like Fannie/Freddie etc., the answer is a hard no. You absolutely cannot. For some commercial lending you can. If you were looking to refer clients to a lender that was doing 1-4 unit residential standard lending, they would be legally prohibited from paying a referral in that case (as in your example, that would not work).

But if you had your lending license and say your brokerage worked with a commercial bank on a commercial loan and you sent the client in and you gathered the documents and did a lot of the processing, you could, potentially receive a referral fee from them as they are not beholden to the same lending regulations as conventional lenders.

The problem with these arises when it comes time to refinance a lot of banks/lenders will try to cut you out and market directly to your client down the road.

Dave Skow · Answer

@Jonathan Farber- " finders fee" from one lender to another not possible

Hanah Frickers · Answer

@Jonathan Farber confirming the responses mentioned above: for investor/non-owner occupied loans, a lender can pay out a referral fee. We at Lendai (loans to foreign national investors) offer this for all partners referring business to us. Best of luck!

Timothy Hero · Answer

As Simmy pointed out, investment properties and/or DSCR loans can be paid out a referral fee. I pay all my referrals, but that's because I do DSCR.

Michael Hutchinson · Answer

Generally, no. Here is the regulation. Compensation practices "no loan originator may receive compensation from another person in connection with the same transaction". On the external side, it is labeled a "kickback" and unethical. You can lose your license, suffer fines and jail time.

That said, there are exceptions and here are a few:

- Paying referrals is covered by RESPA (Internal referral fees) - This is normally inside of the firm where you are not licensed in a particular state.
- Dual role - My company today has its real estate license. In theory, I could put a realtor under me and it would be an internal referral fee.
- MSA - You are allowed to build MSA's for co-marketing purposes, which kinda meets your purpose. It is a gray area in the rules, but one were a lender might work with you.

I can't think of another exception, but the group may be able to.

Andres Saias · Answer

Hello Jonathan, for conventional loans it's not possible. However, if it is an investment loan (depending on the type of loan) for a private lender you can get a referral fee. However, most lenders will take your client and then cut you out of the next deals.

Dominic Pizzi · Answer

Hey Jonathan! You certainly can, depending on the lender. If we work with you and you recommend us to other people we can set up a referral program with you that if the loan closes you'll get compensated for it in some way. It just depends on the team that you work with!

Send me a message!

Simmy Ahluwalia · Answer

We offer referrals to realtors for INVESTMENT financing only, residential or commercial; HOWEVER, you can't double-dip.

If you have agency representation on the deal, your client is going to need financing regardless to Close. If it's a simple referral for a client needing financing and you have NO agency/fiduciary relationship in the deal, then yes, we can work with that.

Is it possible to make referral commission recommending a lender?

Is it possible to make referral commission recommending a lender?

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