There is a new high-tech glint in the eye of your friendly neighborhood real estate broker, as he focuses on expanded services and revenues.
Using the latest computer-generated capabilities, many brokers can now not only find a home for a prospective buyer, they can also line up the best possible financing package.
Using a computerized loan-origination system, a broker can quickly compare the interest rates and other terms from a number of lenders. From this up-to-the-minute information, the loan that is most favorable to the homebuyer (borrower) is selected.
Some systems can qualify the buyer and actually submit a loan application to the selected lender electronically -- all from the comfort of the broker's office via his increasingly sophisticated computer.
These special loan services usually involve a lender-pay or buyer-pay arrangement.
In a typical lender-pay setup, the system is owned by a third party. The broker participates in the computerized network system.
In a buyer-pay arrangement, the homebuyer pays an agreed-upon fee to the broker for the service.
Normally, it's all spelled out in a "mortgage location service" agreement, signed in advance by all parties.
The growing involvement of real estate brokers in mortgage origination, and the right of real estate brokers to collect a fully disclosed fee for providing additional services, was recently discussed by Norman Flynn, president of the National Association of Realtors, at a hearing before the housing subcommittee of the Senate Banking Committee.
The concept of providing a variety of services, including finding a buyer for the seller and matching that buyer with a mortgage to purchase the
seller's home, represents the future for the real estate industry, Mr. Flynn said.
The concept, often referred to as "one-stop shopping," is made possible through these loan origination systems.
The federal Department of Housing and Urban Development outlined its position on the use of these systems by real estate brokers during a Sept. 18 hearing before the housing subcommittee of the House Banking Committee. HUD underscored the NAR's contention that the systems can benefit consumers by providing a wide choice of mortgages, interest rates and loan terms in the convenience of the broker's office.
"Real estate brokers do far more than simply show houses. Today's buyers expect us to have the most
up-to-date information possible on home loans. They view it as part of our role," Mr. Flynn said.
Both HUD and the NAR believe that payment to real estate brokers using the systems is allowed under the Real Estate Settlement Procedures Act. The law, enacted in 1974 to raise consumer awareness about the nature and cost of settlement fees, does prohibit payments for simple lender referrals, which involve no work from a broker. However, the law clearly allows the collection of fees for actual services rendered.
Several states have addressed real estate broker involvement in mortgage origination. A clear trend among states is to permit payment to real estate brokers providing mortgage location assistance, although some states do require real estate brokers to obtain a separate mortgage broker license in order to charge such a fee.
For obvious reasons, many mortgage bankers frown on the emerging trend, holding that the brokers are stepping on their turf. But most industry leaders and legislators seem to feel the expanded role of brokers is in the consumers' best interests.