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Mortgage Brokers & Lenders

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Vince Le
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Doug Smith
  • Lender
  • Tampa, FL
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Doug Smith
  • Lender
  • Tampa, FL
Replied Feb 16 2024, 06:40

If you're talking about investor loans (flip, DSCR, investor construction), then it's a grey area. The consumer side is heavily regulated and it is definitely a no-no to submit directly without going through the broker, but "commercial loans" are not as heavily regulated. I think you just have to ask yourself if you want someone half-a$$ing your loan by going around their normal channels. It's not necessarily illegal if it's commercial, but it's a bit sketchy.

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Replied Feb 16 2024, 08:06
Quote from @Vince Le:

Why do I see some independent mortgage loan officers submit borrower's application directly to lender without going thru their employer/broker's loan processing?

Will the MLO get the full compensation for themself by doing so, and is it illegal?


Hello!

This is an answer I have with my very limited knowledge of the subject, but hopefully it helps.

Florida has a lot of issues with processors as they are required to go through a rigorous process. So some MLOs will process their loans, themselves, as they can't find a processor to do it for them. Some MLOs like to process their own loans, but they aren't compensated for it and it's actually cheaper to the borrower if they do.

The lack of processors is a Florida-only thing from my limited experience.

Hope this helps.

L. Thomas
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David Ross
Lender
  • Lender
  • Henderson, NV
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David Ross
Lender
  • Lender
  • Henderson, NV
Replied Feb 16 2024, 13:33

Loan officers are typically only able to be licensed with one entity and if they're brokering loans to an outside investor/wholesaler - it's pretty standard practice for the loan to be registered first with whatever entity it is where the MLO hangs their license.   For the most part, it's also pretty standard for the loan processing to happen in-house (i.e. wherever the MLO is licensed).   Some larger broker outlets will give the option to have the loan processed and underwritten with them but this isn't the norm (UWM comes to mind as a big lender who now gives the broker this option of taking care of all of the processing or certain aspects of the processing which they call "processor assist" - this is fairly unique as far as I'm aware however).

There are so many little variables to every situation but generally speaking, if an MLO is skipping over the spot where his/her license hangs and taking a deal somewhere direct, there wouldn't be a compliant way to pay the MLO.  

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