Your immediate reaction might be “no, it’s a violation of Respa”. But the answer is not that simple.
It all depends on what you call it, what it’s for and how it’s disclosed. For example, Congress can’t take “bribes”, but they can accept money from lobbyist.
We’ve been promoting e-Closings for three years now. For us, e-Closings have many benefits including: faster closings, less expenses, no possibility of violating regulations, immediate funding, etc.
Many however, are resistant to change. They’ve been doing paper closings for 20 years and they’re not about to variate from that. In order to entice buyers and sellers to e-Close, we started a CLO (computerized loan origination) program where we pay the listing and or selling agent a $500.00 fee as long as they perform services needed for the production of the loan.
If the buyer agrees to close electronically the selling agent receives $500.00. If the seller agrees to sign electronically, the listing agent receives $500.00 as long as they perform the required service. Dual Agents receive $1,000.00.
The CLO fee is fully disclosed. It’s a lender expense and no additional fee is not charged to anyone nor is the rate adjusted higher. e-Closings save us money and we’re passing those savings on to whomever is helping us promote our system.
Remember though, naked referrals are illegal, not to mention unethical. They usually cost the buyer in the form of closing costs and/or rate increases. They also hurt the level of service the lender gives. We’ll talk more about the harm naked referrals have on Realtors, Lenders and Buyers next week.
To view a more detailed explanation on the legality of the CLO Program, please visit the Realtor page on our website at the link below and click “CLO explained”.