First Team, Long & Foster and the Realogy conglomerate and others are all looking for new banking joint ventures as Wells Fargo decides “it just ain’t worth it” under the new scrutiny of the CFPB. The way to get around RESPA for the “big boys” has always been to set up a third banking company and have both sides invest start up capital so it appears like a joint venture. This model is under more and more scrutiny. Companies like Prime Lending are MASSIVE violators of RESPA, in my humble opinion, based on how much they pay to be the in-house” lender with numerous real estate companies around the nation, for “rent” and “marketing”. Full disclosure, I actually look for legal ways to set up similar relationships in a “can’t beat em join em” attitude. But, with this said, I WOULD LOVE TO HAVE Prime and others compete fairly with myself and my company as we would clean their clocks with pricing and service. The bottom line in my opinion, is that in this particular instance, I actually welcome more scrutiny, not less. I got into the business when real estate agents got paid 50% commission and top producers may approach 70% max, as the Broker, taking all the risk, managing a Trust account and running a profitable operation could not afford to pay more. The business changed when a well-known enterprise stormed onto the market and began offering 100% commission splits. However, in order to grow this pay as you go model, they had to change their approach. A Regional Director said in a meeting I attended for Franchise owners; “You are no longer in the real estate business. You are now in the landlord, escrow and lending business.” The message being that in order to pay high commissions to the vast majority of agents who a few years’ earlier could only get 50% to 60% commission splits due to their low productivity, one had to make revenue elsewhere. This model has taken over. CW was huge in this space, both in real estate offices and builders. However, once BofA took over, this waned and then went away. Chase is still into this space and now with WF removing themselves, I have to question how long they will continue. This will leave many openings for the smaller more aggressive mortgage banking players who will fill the void. I believe, based on counsels advice, that so long as a lender does not pay more than what a shoe salesperson would pay for rent within a real estate office, one will likely be in a defensible position. Based on how aggressive the CFPB is being in this space, you have to ask yourself; “How lucky do I feel?” Here is what WF said; Wells Fargo & Co. is withdrawing from the eight joint ventures it has in the mortgage lending business. The company said in a press release that it made the decision based on the current regulatory and market environment. These ventures were responsible for just 3% of the company’s mortgage production. The press release also said the decision did not “affect our commitment to our retail and correspondent mortgage businesses.” The eight ventures involved are Bankers Funding Co. LLC, Colorado Mortgage Alliance LLC, DE Capital Mortgage LLC, HomeServices Lending LLC, Military Family Home Loans LLC, Prosperity Mortgage Co., Premia Mortgage LLC and Private Mortgage Advisors LLC.
Posted on: Fri, 26 Jul 2013 14:47:11 +0000
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