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A settlement to resolve a series of Real Estate Board lawsuits could make it harder for mortgage lenders to drum up business by offering inducements to homebuyers who agree to be represented by real estate agents who are partners with the lenders.
Some large mortgage lenders, including Rocket Mortgage, loanDepot and Better, charge referral fees to partner real estate agents in exchange for sending them “leads” – unrepresented buyers who qualify for a mortgage or are looking for a lender.
Lenders can incentivize buyers and sellers by promising thousands of dollars in cash or closing credits to those who agree to work with a partnering real estate agent—essentially kicking back a portion of the commission the buyer or seller pays their agent. .
One of the partner agent programs is offered by Navy Federal Credit Union, powered by a subsidiary of real estate franchise giant Anywhere. Anywhere was formerly known as Realogy, and its brands include Better Homes and Gardens Real Estate, Century 21, Coldwell Banker and Sotheby’s International Realty.
But the National Association of Realtors agreed to ban listing brokers from compensating buyer’s agents through the Multiple Listing Service (MLS), which could inadvertently undermine mortgage lenders’ referral programs. NAR did not respond to Inman’s request for comment.
The injunction is part of a $418 million settlement proposed by NAR announced on friday The hope is to resolve a series of commission lawsuits filed by home sellers that could make it harder for lenders to advertise incentives to consumers who agree to work with their agent partners.
This is because mortgage lenders typically recoup at least part of the cost of providing these incentives (which can be as much as thousands of dollars in cash) by charging the agent (or their broker) a referral fee (usually a percentage of the agent’s commission) or pay off credit) If the “leader” buys a house, he makes money.
The proposed settlement — which would also require buyer’s agents to enter into written agreements with their clients — could make offering such incentives to consumers riskier because it’s harder to know in advance how much buyers are actually willing to pay. . agent.
Some buyers may even decide they don’t want to work with a buyer’s agent at all once they are asked to sign a written agreement specifying how much they are willing to pay an agent.
Lender Partner Agent Program
To facilitate payment of referral fees, many mortgage lenders set up their own real estate brokerage operations. But real estate brokerages run by mortgage lenders typically don’t employ many agents or provide services directly to consumers.
Rather, they exist primarily to provide lenders with a mechanism to collect referral fees from other real estate brokerages that employ agents and populate real estate search portals with listing profiles from multiple listing services (MLS).
For example, Rocket Mortgage’s parent company also operates Rocket Homes, a real estate brokerage. Real estate search website for brokerage companies, RocketHomes.comattracting approximately 1.5 million unique visitors every month.
Rocket Mortgage’s Partner Agent Incentives
Rocket’s partner agents complete credit quotes. source: Rocket Mortgage.
To incentivize homebuyers, Rocket Mortgage’s “BUY+” program promises to provide loan closing costs equivalent to 1.25% of the loan amount (Maximum limit is $10,000) if they are represented by an agent working with Rocket Mortgage. (when Announced April 2023the program initially offers a 1.5% credit on closing costs).
Rocket Homes’ role in matching buyers with agents not only makes it a potential defendant in real estate board lawsuits, but the outcome of those lawsuits could impact its referral business, the company reported last month pointed out in. 2023 Annual Report to investors.
“In addition to litigation risk, the development or outcome of such litigation or other legal proceedings involving real estate industry operations could result in significant changes to the broker commission structure, the impact of which could result in a reduction in the commission share of Rocket Homes in our core referral business as well as We generate revenue from our efforts to list and sell homes in our centralized locations,” Rocket Companies disclosed to investors.
Representatives for the Rockets did not respond to Inman’s request for comment.
LoanDepot offers up to $3,500 cash back on homeownership purchases mellohome accredited real estate agent And financing through loanDepot.
in its latest annual report For investors, loanDepot describes its mellohome agent matching service Home Services LLC as “our wholly owned, exclusive real estate recommendation business. The majority of our purchase-oriented customer leads have not yet selected a real estate agent, so we have the opportunity to Provide more comprehensive customer service between key home buying functions and generate ancillary revenue in a RESPA compliant manner.”
RESPA (Real Estate Settlement Procedures Act) is legislation designed to help mortgage borrowers purchase settlement services such as title insurance without paying rebates and referral fees that can add to costs.
LoanDepot’s $7,000 “Grand Slam” Bundle Bonus
source: Melohom.
In 2021, loanDepot launched the “Grand Slam” rewards program, which allows customers to earn up to $7,000 in bundled services when they buy or sell through a mellohome preferred real estate agent, finance through loanDepot and select the company’s title insurance services cash rebates.
A LoanDepot spokesman said the company had no comment on the potential impact of NAR’s proposed commission settlement on the company’s partner agent incentives.
Navy Federal RealtyPlus Partner Agent Program
source: Anywhere Leading Company
navy federal credit union RealtyPlus Plan Offers cash rebates of $400 to $9,000 to homebuyers and sellers who sign up to connect to real estate agents in Navy Federal Credit Union’s agent partner network, powered by franchise giant Anywhere.
according to a Website FAQ For the Navy Federal RealtyPlus program, Anywhere shares a percentage of the commission with Navy Federal Credit Union when buyers and sellers referred to Anyh-affiliated agents close deals.
“When you buy or sell a home through our program, the real estate company shares the commission with us,” potential borrowers are told. “This commission split is a common practice in the real estate industry and is used to increase an agent’s business and save fees for homebuyers and sellers.”
Representatives for Anywhere and Navy Federal Credit Union acknowledged receiving requests for comment from Inman on Friday but had not responded as of publication time on Monday.
better offer $2,000 Checkout Credit Buyers working with Better Real Estate partner agents. After shutting down its in-house real estate brokerage service last year, Better moved to a “pure partnership model” on the real estate brokerage side, pairing borrowers who come to Better to get pre-approved for a mortgage with agents in local markets.
When Better completed its long-awaited SPAC merger in August, freeing up $565 million in new capital, Better CEO Vishal Garg told Inman the company would hire mortgage loan officers, coordinators, processors and underwriters and ” Actively work with real estate agents to grow your business “to the next level” than before.
A spokesperson for Better said in a statement that the company “anticipates a significant increase in demand for our partner agency programs as a result of the NAR settlement.”
Better’s Partner Agent Incentive Offers
source: better real estate
Better declined to answer whether uncertainty about how much homebuyers might be willing to pay their agents if the NAR settlement goes into effect would affect Better’s promotion of “big savings” if you “match a partner agent and save $2,000.” Ability.
Better’s position is that “if a buyer’s real estate agent’s fees must be paid for through the mortgage, customers will increasingly look to the mortgage company for help selecting a price-efficient real estate agent. With title insurance and homeowners insurance Programs are similar and we believe we will be able to help match consumers with real estate agents who offer them the best value.”
Sharon Cornelissen, director of housing for the Consumer Federation of America (CFA), said that if the NAR’s proposed settlement passes, it would “provide lenders with additional incentives to ensure that the real estate agents they work with provide high-quality properties at favorable prices.” Serve.” “
“We hope lenders will explore some products to help first-time homebuyers pay a real estate agent’s additional closing costs,” Cornelison said in an email to Inman. Although CFA expects commission costs to fall, “I It is believed that ‘settlement cost’ schemes will be more necessary than ever.”
Editor’s note: This article has been updated with comments from the Consumer Federation of America, and please note that loanDepot declined to comment.
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