well said Scott.

I noticed that too, and I think you are right. If I remember correctly, I think the term is "tying"--as it is illegal to tie one transaction with another, as if you use a certain broker, you have to use a certain mortgage officer, insurance, etc. Correct me if I am wrong, as I am getting old too.

No, you are right KY. As I had mentioned before HUD has particular concern that steering a customer to a particular lender, which is prohibited under Section 8 of RESPA, could be disguised as compensation for counseling-type activities.

The true definition of "steering," in the context of real estate, is exactly the one you mentioned East Texas Realtor.

"Steering" as mentioned in regards to mortgage lenders was used most likely as a synonym for "influncing" a borrower to use a specific lender i.e. in-house lender.

As Realestatefla1 pointed out, mortgage Fraud is a major epidemic in this country. However,it is worth mentioning that according to the FBI's definition of mortgage fraud, any stated loans where the borrower's income is "inflated" fall into that category as well. In the world of mortgage lending, stated loans are also known as "liars' loans," meaning that wholesale lenders, banks...know that the income stated on the 1003 most likely has been indeed "inflated" yet, I have yet to see "stated loans" being turned down. Any underwriter will tell you that as long as the stated income is reasonable for the profession (i.e if someone is a janitor and the stated income says that the borrower's monthly income is $15,000...guess what, that's a major red flag and most likely won't fly) then it's ok...as long as the borrower has the ability to repay the loan. Unfortunately, there are LOs who will "inflate" a borrower's income to the maximum "reasonable" number to get the loan approved but doing so is not always in the borrower's best interest in the long run. This is where accountability in regards to making sure we, LOs, give the borrowers a payment THEY CAN AFFORD comes into play. Unfortunately, many LOs don't care about the long-term financial well-being of their borrowers and just want to get the deal closed to get the paycheck. I'll go even further by saying that sometimes borrowers have no idea that their income has been indeed inflated.
So mortgage fraud is very broad and the problem lies deep in the system at times.
If you look closely at this forum, there have been many scenerios presented that could fall into the mortgage & real estate fraud category. Straw buyers are a major issue as well. Non owner occupied properties passed as owner occupied properties, the list goes on and on....
Sometimes agents have no way of knowing that they are involved in a fraud situation until the LO unravels the issue. It's happened to me. An agent referred a buyer to me and as it turned out he was a straw buyer for a real estate investor. What the investor did not know is that his straw buyer had a BK on his report and when that detail came to the surface, the whole thing exploded. Could I have done the deal if I had wanted to? Sure, I could have made it work. Was getting the deal done at the risk of losing our licenses worth it to us? Needless to say, we both wished them luck and walked away from the whole thing.
Don't forget that when a lender calls "foul", both the agent and the LO are held liable for fraud.

Hence why it is so important to work with people who share the same core values and ethics as ourselves.

As for AZ I've always been a big fan of yours. There is no doubt that you are very passionate about our profession and industry and I have a lot of respect for anyone who is, and yes that includes Paul Oaks too . In addition, it is obvious that we can all learn a lot from one another: agents and LOs repectively.

Many of us (agents and LO) are very well aware of the flaws of our system...and those of us who care enough to identify them are the ones with the ability to make the system better for everyone.

Awwww...you're sweet Alea. Thank you!

I agree mostly. I have had numerous realtors place impossible and unnecessary deadlines, freak out over little things and put my clients into a panic. i have also had them illegally steer my client to their in house lenders. I now make it a point to warn all my "needs home" clients to be wary of realtors who may try to illegally steer them to a lender of their choice. I let them know about the RESPA laws and illegal kickbacks and how it's important to play by the rules etc... You would be surprised how many realtors break the code of ethics. Now, it's 5 pm and I am out of here....

You are absolutely wrong. There have been dozens of court rulings to the contrary...

[QUOTE]Originally posted by East Texas Realtor:
[QB] WAAAAYYYY back in this thread I saw the work "steering" being tossed around with regard to agents/brokers sending clients to specific mortgage brokers.

Maybe I'm just getting old, but isn't "steering", as it applies to agents, about steering clients toward certain housing/neighborhoods?.....What does it have to do with an agent referring clients to various service providers.

My apologies. I used the term in the context of Realtors "steering" clients to their in house LO's for illegal kickbacks. I see now after a quick google search that many realtors also have a penchant for racial discrimination as well. Again, I apologize.

So exactly what constitutes illegal steering????? Please give us your definition.

If I refer my favorite in house lender to a client would that be illegal steering in your book?


We have an in house lender who does a terrific job getting clients financed and to the table. We the agents get NOTHING for recommending our lender other than someone that will return our calls and keeps us informed if there are any problems.
I also recommend to local banks to my A credit buyers as they offer great rates and excellent customer service.
I hav a totally different lender for commercial products and about 20 hard money lender I use.

I am sure that when you define illegal steering to your potential customers the definition is very broad..........

I always ask my buyers if they have been pre-approved yet. If not then I require them to get that pre-approval before showing them homes. If the buyer has been working with a lender who has not gotten them pre-approved at that point then there will usually be issues with that lender later!

BTW: Deadlines are normally not impossible or unnecessary and in most cases legally required. Just because you feel a deadline is impossible does not make it true. Realtors do not as a rule freak out over little things if there is proper communication....

"So exactly what constitutes illegal steering????? Please give us your definition."

Paul,

This is HUD's definition. The way HUD sees it is the borrower should be the one choosing the financing. For the following reasons released by HUD via this memo:

HUD has particular concern that steering a customer to a particular lender, which is prohibited under Section 8 of RESPA, could be disguised as compensation for counseling-type activities.

AZLending you are so mislead & misinformed. You scare me due to the fact that Real Estate Brokers from Oregon read this forum and one may listen to you and then loose their license -

Keep in mind that not all States are the same but you need to understand something; as a Real Estate Broker I have a fiduatuary responsibility to my client. That includes understanding and going over the HUD-1 with my client. To ASSUME that it only applies to you as a Lender is pure doodie. If I as a Broker consistantly sends Buyers to a Lender that consistantly charges higher fees and/or pads it with “junk fees” that would be a very good way to loose my license!
I consistantly send Buyers to a Lender that is very competative & fair on his fees and do not pad them. I have heard “No you cannot do that” which is also bull. No Broker in Oregon lost their license for it. The Attorney for the Real Estate Agency has said time and time again that a Broker will NEVER loose their license for sending a Buyer to a “Honest & Ethical Lender and if you have a Lender who is fair and honest then you HAD BETTER BE sending your Buyers to them. It is when YOU DON’T that you will loose your license”.

For you to say it is not our place to go over the HUD-1 confirms my prior opinion.
To say that Lenders don’t need Real Estate Brokers confirms my prior opinion.

You may not think so but a Lender and Real Estate Broker / Agent go hand in hand. It is like a marriage and if one is rotten it will not last.

So do you not use or work with Real Estate Brokers / Agents because they call you on your padding of the ‘Junk Fees” or is it the “Bate & Switch” of the interest rate?

I go to EVERYONE of my closings with my client. I can count on one hand how many lenders I know that do the same and those are the ones I work with and send my Buyers to.

I don’t think people understand how may lenders commit “Fraud” to “Get the deal done” and if their “Boss” is pushing them to “Just get the deal done” then that Loan Officer might think about going to a more reputable company unless they like the idea of the Government paying for their “New 10 X 10 Residence”.

How many homeowners are loosing their homes due to Unethical Lenders convincing Buyers that an Adjustable Rate Mortgage is what they want because they can buy their “Dream House” and they will have low payments only to find out two years later that they can’t refinance because they don’t qualify on a fixed rate and the adjustable was for only two years and their income had not increased. (I just got off the phone with one who responded to my letter regarding his pending foreclosure). More than likely, that Buyer should not have purchased that home to begin with BUT because of the “Creative Lender Practices” he will more than likely loose the house. The loan officer doesn’t care - He collected his fee (thousands and thousands) a long time ago and has moved on to his next victim -

Rob,
I know what HUD says but I was more curious what relitters slanted definition is. If he has lots of Realtors and agents telling their clients not to use him then I feel there are other issues with this lender.
I already stated that we the agents get NOTHING in the way of compensation for referring the in house lender. Nor do I recieve any compensation for referring any other lender that I recommend.
No Compensation=No Steering

For clarification a Hard Money lender can pay referrals as their loans are not subject to Section 8 or Federally Regulated.

"For clarification a Hard Money lender can pay referrals as their loans are not subject to Section 8 or Federally Regulated. by Paul


Interesting, I did not know that.

"Keep in mind that not all States are the same but you need to understand something; as a Real Estate Broker I have a fiduatuary responsibility to my client. That includes understanding and going over the HUD-1 with my client. To ASSUME that it only applies to you as a Lender is pure doodie. If I as a Broker consistantly sends Buyers to a Lender that consistantly charges higher fees and/or pads it with “junk fees” that would be a very good way to loose my license!" by 24 Salem 7


I totally agree with you in that aspect. I am not a proponent of padded or inflated fees either, however I have had experiences where valid fees were scrutinized by the realtor even though the borrower was fully aware. That is where my gripe lies. You have no idea which lender charges what and how much as it varies by wholesaler.