I know it's illegal for real estate agents to pay referral fees to unlicensed people, but what about mortgage brokers... can they just pay anyone for leads?

I got this in the mail today from a newsgroup I belong to...

"I work for [Blah blah] in [Anytown], AZ. If any one refers someone to me for a home loan, It can be a purchase or refinance, I will give you $300 CASH when the loan closes!

I close quick, with the best rates out there. I can get 100%
financing even for buyers with bad credit! I also have a great
network of realtors that can assist you in process."

RESPA Section 8 says that a LO/Broker cannot give anything of value dependent upon settlement of a mortgage transaction to the person that referred them the business. However, a LO/Broker can give anything of value to a borrower dependent upon settlement of a transaction.

RESPA Section 8

I have been offerd $ by several brokers in my area.. this is good to know.

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Rigzin Vassallo
Sonoma County Real Estate
www.rigzin.com

Kickbacks are going to eventually land some butts in the clink. It goes on all the time, but is illegal.

What is the difference between paying for leads and paying for generated referrals?

i.e. I know of an LO that has a team of lead generators that he pays at closing to generate leads for him. They go about it by knocking on doors, cold calling, etc.

Are you saying that is illegal?

There isn't anything illegal about paying an upfront fee for outsourced leads, as long as it's not dependent upon settlement.

RESPA permits giving commission/bonuses to a "bonafide employee" who does not perform settlement services as so long that it is disclosed and in compliance to Section 8.

You can read further in this link Exemptions

Think about it this way: if an LO needs to pay to get business, he or she must not be that good. When you are great at what you do, legitimate referrals will come. I think everyone who contributes to this board will agree with me on this, it's a lot easier to pay for referrals than to earn them. Earning referrals takes time, hard work, perseverance, integrity, knowledge, experience, and a whole lot of (insert your fav. liquor here--just kidding :p ) to get over all the doors you get slammed in your face when you first start in this business. Earning referrals is one thing but earning a good reputation is EVERYTHING. And somehow I don't think kickbacks is a good way to build a solid one...call me crazy.