In an era when almost every other industry has been fully integrated thanks to technology and automation, most home buyers still have to move through a maze to purchase a home. A recent industry article noted that up to 42 different people and 104 separate documents were required to close a single loan. Not only is this model inefficient, time consuming and confusing, studies show that borrowers are frustrated by the process, rating it as the single most unsettling transaction of their life.

As consumers experience the convenience of “one-stop” shopping in almost every other business segment, it’s no surprise that a vast majority are clamoring for a simplification of the home buying process. According to a recent study conducted by the National Association of REALTORS®, 78 percent of consumers said they want one-stop shopping to meet all their home buying needs, and 66 percent said they would use a real estate professional that offered this service.

Until recently, decades old federal regulations, known as RESPA (Real Estate Settlement and Procedures Act) placed firewalls between real estate agents and mortgage lenders, preventing agents from offering mortgage loan origination services. But now, thanks to a 1996 reinterpretation of these regulations, real estate brokers and their agents can provide loan origination service to homebuyers, as long as their services are in compliance with federal, state and professional regulations that govern real estate and mortgage banking.

Compliance is the key to opening this opportunity to real estate brokers and agents. Although the 1996 ruling says that brokers/agents can be compensated for loan origination services, certain conditions must be met. In order to be compliant, the broker/agent must meet educational requirements, offer disclosures, and provide the borrower a of loan choices. RESPA still packs a powerful combination of penalties for non-compliance, so it is important to be mindful of what RESPA regulations allow.

RESPA prohibits the payment or receipt of “any fee, kickback or thing of value” in exchange for the referral of settlement service business, including loan origination services such as taking applications, obtaining income verifications and communicating with a borrower or lender. RESPA does, however, permit a lender to make reasonable payments to its agents and contractors for services actually performed in the origination and processing of a loan. What services can be compensated? Here are some general categories that are recognized under RESPA:

1. Discussing loan options with consumers and pre-qualifying applicants.
2. Taking the loan application and submitting loan packages for underwriting.
3. Verifying employment, credit and other data that underwriters require.
4. Ordering appraisal and title services.
5. Scheduling closing and attending the settlement meeting.

In a perfect world, there would be a national standard for what compliance means, and current laws are certainly due for an overhaul. However, as they stand today, there are literally thousands of state and federal laws and regulations as well as hundreds of professional guidelines that must be monitored to ensure compliance for third party mortgage loan origination. Last year alone, there were hundreds of changes in laws and regulations across the country that affected how the real estate transaction takes place.

How can a real estate broker or agent keep up with this continuously changing environment? Automating the regulatory compliance management of a mortgage loan transaction is the solution in order for agents and brokers to originate loans in a safe and legal way.

For example, OnePipeline’s Automated Compliance System TM empowers brokers and agents with the technology they need to ensure their compliance in this complex process. This automated compliance technology manages the workflow associated with mortgage processing. To ensure its ongoing compliance to laws and regulations, the system’s engine is constantly fed data from a comprehensive network of attorneys, professional and trade organizations, and various media, generating the most up-to-the-minute compliance menu. Brokers and agents can access this system via the Internet, or off-line, providing them with the opportunity to originate loans legally for their customers and be compensated at the same time.

A recent survey conducted by Fannie Mae shows that one-in-two Americans now believe that most home mortgages will be handled over the Internet by the year 2005. As technologies continue to develop and consumer expectations continue to rise, real estate brokers and agents must expand the number of services they provide to keep themselves at the center of the transaction by becoming a viable source for one-stop home shopping. Providing mortgage loan origination services, while fully complying with all federal, state and professional regulations, will give you a great head start on your competition.

Published: October 27, 2000

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