Real Estate Agent's Lender Referrals, Best Practices

By
Mortgage and Lending with Jensen Mortgage Services

I am going to make a confession that I do not actively campaign to become anyone's preferred lender.  I would prefer to be one of your three recommended lenders to provide your borrower's with a very aggressive rate and cost quote so that they can be absolutely confident that you were looking out for their best interest.  It's been my experience that some Real Estate agents seem to want more than just good service for their referrals and I think that presents a challenge to RESPA policies, ethics and the value that we should be providing our clients.  I'd like to see DFI clean house in lender/Realtor relationships in the same manner that they did with Title and Escrow companies.  Once this happens, the real winner becomes our clients.  It would be fantastic if service actually became the focus again and not how far we can dig into eachother's pockets.

My recent experience with a couple really sums up the challenges presented by the "preferred lender" posturing.  My new clients purchased a home in Tacoma two years ago from a prominent northwest real estate company and was referred to a well known local lender who appears frequently in all major real estate publications as a representative of a local bank.  The assumption with this Filipino couple from Texas(they had only been in the United States for 3 years) was that their real estate agent was obviously looking out for their welfare because he was so strongly insistent that they use HIS preferred lender. 

Unfortunately, you might guess the rest of the story.  This couple was put into a 2 year fixed program on a 3 year prepay, which is just about as sleazy as it gets.  The pillaging of this couple was obvious after I reviewed their HUD 1 settlement statement.  I have put clients on 2 year fixed programs to assist with credit repair or when it was also obvious that they were moving within a 2 year time-frame, but that's basically the only reason why I would put anyone on such a short term loan.  This couple's credit score was excellent and had no immediate intention of moving.  The fact of the matter is that this couple probably spent close to 5 points on a combination of origination points, discount points and a hidden rebate that the bank gives the loan officer.  Frankly, this couple should never have been charged more than one point in total fees(not counting 3rd party fees) because of their excellent credit history and the ease of doing their loan.  Of course because this couple was put on a 2 year fixed program, there is the additional benefit of turning this client into another refinance opportunity. 

The relationship of this real estate agent and HIS preferred lender I am sure is a nifty business arrangement, but what about the client?  I am a firm believer that clients WILL appreciate your service even more, because you took the time to provide at least 3 to4 lenders that they can contact for competitive quotes.  When you do this for your clients, they will LOVE you for it, because they will truly find the best advice and value along with purchasing the home of their dreams!

Comments (18)

Brian Schulman
Coldwell Banker Residential Brokerage, Lancaster PA - Lancaster, PA
Lancaster County PA RealEstate Expert 717-951-5552
Vance, I don't think there is a problem with having preferred lenders, as long as the referral is based on superior service and/or rates.  Cozy arrangements like you described are not representing the client's interests , if not outright RESPA violations.
Aug 23, 2007 12:07 AM
Anonymous
Vance Walden

I do not disagree with you, however, you should always encourage your borrowers to get at least 3 quotes from reputable lenders.  When you do this, you are demonstrating to your borrowers that you truely are interested in getting them the best service and rates.

Aug 23, 2007 05:59 AM
#2
Brian Brady
San Diego VA Home Loans/858-777-9751 - San Diego, CA
858-777-9751

Vance-

That may be a dangerous practice in this market.  I think Realtors need a go-to lender in these tumutuous times; there is just too much riding on the transaction today. 

Aug 23, 2007 04:38 PM
Edson X. Bezerra
Boardwalk Realty of Florida - Fort Myers, FL
I advise my clients to shop for their mortgage especially if they have good credit.  It gives them control and knowledge as to what the charges are between lenders.  Great insight into your business.  Good luck.
Aug 23, 2007 04:51 PM
Cyndee Haydon
Charles Rutenberg Realty - Clearwater, FL
727-710-8035 Clearwater, Beach Short Sales Luxury Condos &Homes

I agree with Brian - however we make sure we have no financial incentive to ever recommend anyone. We also have no problem working with a buyers lender of choice. I can say we have kissed so many mortgage frogs that having as Brian said - "go-to lenders" that you know their word means something is essential to HELPING your buyers.

We purposely work for a broker who has no mandated financial relationship - our referrals are earned and are based soley on what's best for the buyer.    

Aug 23, 2007 05:21 PM
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes
Respa violations, no -- but having preferred lenders who we know can do a good job for our clients, yes. No special "favors" needed ~ just a good job for the client.
Aug 23, 2007 06:04 PM
Anonymous
Vance Walden

Cyndee,  I appreciate very much what you said.  I know that your clients must be well served. However, rather than leave your clients loan shopping to chance, perhaps you know at least 3 very reliable lenders who they can shop for the best terms.  In this way, you are insuring that the purchase is accomplished and your client get's the absolute best service and value.  Working with several talented lenders is also an effecitve insurance policy during these very difficult times.

Aug 23, 2007 06:35 PM
#7
Darrel Quebedeaux
Evergreen Realty & Associates Inc. - Newport Coast, CA
I appreciate your position and agree with the things you say.  I can also agree with Cyndee.  I don't want anything from a lender but their dedicated service for my clients best interest.  I have made comments on other post and have had mortgage guys come down on me for my position but I don't care who they are dealing with I will continue to advise my clients to check with at least one other lender just so they know they are getting the best deal and be prepared if something unseemly should arise in the final days as we have all seen.
Aug 23, 2007 06:44 PM
Anonymous
Vance Walden
Darrel, it's refreshing to read what you, Cyndee and other professionals have shared. I am really encouraged by this and can only hope that there are many just like you who are working hard on the behalf of their clients in the Puget Sound, WA area. 
Aug 23, 2007 08:20 PM
#9
Ki Gray
Austin, TX
Austin Real Estate
Thats really upsetting what happened to the couple.  I think their are too many people in this business that forget our first obligation is to our clients.  When I give clients a few lenders name I usually advise them to call around as well.
Aug 23, 2007 10:22 PM
Rebecca Savitski
BSR Real Estate Group - Cary, NC
NC Real Estate Listings
I do not blame you at all good post.
Aug 23, 2007 10:41 PM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Well, I would be negligent if I didn't recommend mortgage companies that suited my buyers' needs.  I do not tell buyers to "shop around" because they don't know how.  All they know to ask is "What are your rates?"

I am a fiduciary and I refer my buyers to loan officers with stable lenders who give excellent service and close on time.  That's my job. 

Now as for benefits to me???  I get paid when a sale closes.  I wouldn't even let one pay for lunch. 

I don't even accept buyer referrals from loan officers.  Who knows, they may not have the best loan for the buyer they refer.  Wouldn't that be a sticky wickett?

 

 

Aug 24, 2007 02:14 AM
Robert Spaight
Homestar Mortgage - Barrington, RI

Vance I agree with you to a certain extent.  Yes I think it important for a buyer to get several financing quotes but it is absolutely my goal to be an agents "preferred lender".  Most of the realtors that refer me business do give out 3 cards for mortgage originators.  My job is to provide competive rates and excellent service to assure that my card is on the top and might get a little extra edorsement from the agent.

Aug 24, 2007 02:45 AM
Joshua Talayka
Chase Internatinonal - Reno, NV
Vance, i must say your post (although a bit harsh) does bare some truth about how some people in this industry don't put their clients needs before their own.  First off, a happy client is going to be more beneficial to you down the road anyways.  Now, as far as having preferred lenders go, i don't see a problem with that as long as your preferred lender is looking out for their clients.  Like many of you, i am constantly contacted by lenders wanting to do business together.  However, i am very picky with who i am willing to refer my clients to.  First off, i make it very clear to the lenders i work with that i expect by the time my clients decide on a loan, that they understand all the pros and cons to that particular loan, as well as any other options that are available.  I also expect them to be upfront about their fees and costs.  Come closing, if there is any additional costs, or if my clients don't feel like they have all the facts, i've recommended they look elsewhere and that we can just extend escrow.  there's no reason for anyone to end a transaction with a bad taste in their mouth, there's simply to many lenders out there to choose from to have to take that type of poor customer service.
Aug 24, 2007 07:05 AM
Anonymous
Vance Walden

Hi Joshua,

Great comments.  Unfortunately, I am not very popular with some of my peers, but I am not concerned with that at all.  I am a consumer advocate and I get extremely irritated when I see another lender or mortgage broker pull the classic "bait and switch" at closing. I have also seen more than my share of lender fraud and ethics issues, which totally PO's me off and I guess that's where my harshness comes into play.  I am pleased that the State of Washington is finally requiring that loan officers must pass a competency's test and get approved with the DFI before they can call themselves a loan originator. 

Aug 24, 2007 07:28 AM
#15
Aaron Gordon
Branch Manager - Las Vegas, NV
Home Loan Consultant - Las Vegas, NV

Vance--- Most of my business comes from agent referral.  I have been asked many times by new agents for illegal kickbacks and my response is always the same.  "No way!"    

The reason, aside from the obvious legalities, is for the example you discuss.  I am sure the reason why that loan was so expensive was because the lender probably is in a kickback arrangement and to make it profitable for everyone, the borrower gets the shaft. 

Successful agents don't need your kickbacks and most don't want to be responsible for finding 3 or 4 lenders.  They need their deals to close successfully. 

If you can prove that time and again, you win their loyalty, their referrals, and you can treat their client properly.

Aug 24, 2007 11:21 AM
Leo Namiot - SimplerHomeLoan
Canopy Mortgage - Leo Namiot - Saint Augustine, FL
Before you chose a lender check my rates and fees

I love being the preferred Mortgage Consultant. My referral partners send their vlients to me because they know when I say I can do a deal it gets done and they know that my service will always exceed my customers expectations and make my referral partner shine! 

 

Leo Namiot

The Real Estate Agents Preferred Mortgage Consultant

Aug 24, 2007 01:49 PM
Anonymous
Vance Walden

Leo, that's outstanding.  It's a sure bet than that you will be equally impressive to your perspective clients when they have finished their due diligence and did some comparisons on their own. 

 

 

 

Aug 24, 2007 06:07 PM
#18