Referral Fees- What's really legal?

Lender · Member since 2023 · 57 posts · 33 votes

Is it legal to pay a referral fee when someone sends you a borrower for a non-QM/DSCR/HML loan?

I am in search of an attorney who can help answer the age old question but I am constantly hitting a wall with lawyers that don't really work with non-QM loans.

Who can I go to? What legal counsel would you recommend?

How do brokerages pay out referral fees? Do they just categorize it as a marketing fee?

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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
1mo
Quote from @Jada Thoele:

Is it legal to pay a referral fee when someone sends you a borrower for a non-QM/DSCR/HML loan?
I am in search of an attorney who can help answer the age old question but I am constantly hitting a wall with lawyers that don't really work with non-QM loans.
Who can I go to? What legal counsel would you recommend?
How do brokerages pay out referral fees? Do they just categorize it as a marketing fee?

This varies per state.
Generally BUSINESS PURPOSE DSCR, Commercial, and Hard Money do not follow TRID/RESPA. Some states may allow you to pay referral fees, especially those without licensing restrictions. There are many brokerages that still get paid a "referral fee" without holding any kind of license in the state they are doing business in.
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- Jada Thoele
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  Lender · Member since 2023 · 57 posts · 33 votes
  1mo
  Quote from @Erik Estrada:
  
  Quote from @Jada Thoele:
  
  Is it legal to pay a referral fee when someone sends you a borrower for a non-QM/DSCR/HML loan?
  I am in search of an attorney who can help answer the age old question but I am constantly hitting a wall with lawyers that don't really work with non-QM loans.
  Who can I go to? What legal counsel would you recommend?
  How do brokerages pay out referral fees? Do they just categorize it as a marketing fee?
  
  This varies per state.
  Generally BUSINESS PURPOSE DSCR, Commercial, and Hard Money do not follow TRID/RESPA. Some states may allow you to pay referral fees, especially those without licensing restrictions. There are many brokerages that still get paid a "referral fee" without holding any kind of license in the state they are doing business in.
  Ok this is definitely in my line of thinking. I'm just lost when it comes to finding an attorney that can confirm this.
  Many are so in the weeds of primary mortgages they say 'any referral fee is illegal.'
  Anyone come to mind to talk to regarding the legalities?
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Jesus SuarezBusiness Member
Lender · TX, FL · Member since 2025 · 131 posts · 54 votes
1mo
Quote from @Jada Thoele:

Is it legal to pay a referral fee when someone sends you a borrower for a non-QM/DSCR/HML loan?
I am in search of an attorney who can help answer the age old question but I am constantly hitting a wall with lawyers that don't really work with non-QM loans.
Who can I go to? What legal counsel would you recommend?
How do brokerages pay out referral fees? Do they just categorize it as a marketing fee?

Standard mortgage lawyers usually hit a wall here because they're stuck in consumer RESPA land, but since DSCR and hard money are business-purpose loans, it really comes down to state commercial licensing rules. In my opinion, skip the residential lawyers and talk to a private lending attorney who understands business-purpose debt. As for paying referral fees, my take is that using a formal Finder's or Co-Broker Agreement disclosed on the closing statement is the cleanest route disguising it as a "marketing fee" feels like a risky workaround if an audit ever happens.
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