Mortgage referral fee fought by banks

November 04, 1992|By Ellen James Martin | Ellen James Martin,Staff Writer

The mortgage banking industry is hopping mad about new government regulations they say will cut into their business and prove costly to homebuyers.

"They're horrible," Herbert Tasker, president of the Mortgage Bankers Association, said yesterday of the rules adopted by the U.S. Department of Housing and Urban Development and due to become effective next month.

The rules, which were applauded yesterday by the National Association of Realtors, permit the payment of fees to real estate brokers who use computerized loan origination (CLO) within their own offices to make mortgages for home-buying customers.

Brokers have been allowed for years to help arrange mortgages for homebuyers. But in the past, the payment of referral fees by lenders to the brokers were prohibited under the Real Estate Settlement Procedures Act.

The new rules, just published in the Federal Register, allow the payment of fees to realty offices when they originate a mortgage on behalf of a lender -- as long as those fees are fully disclosed to the consumer.

"I think it's a good deal for the American public," Dorcas Helfant, president of the National Association of Realtors, said of the idea that real estate brokers should be allowed to originate mortgages in their own offices.

"HUD correctly backs our contention that CLO systems can benefit consumers by providing a wide choice of mortgages, interest rates and loan terms -- all in the convenience of the broker's office," Ms. Helfant said.

"From the Realtors' standpoint, if they perform a valid service, they should get paid for it," said Keith Gumbinger, an analyst at HSH Associates, which tracks mortgage information for consumers.

On the other hand, he noted, many mortgage bankers are afraid they won't be able to compete for homebuyers' loans unless they pay referral fees to agents and find themselves on the agents' favored list.

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