CONTINUED FROM PAGE 17 Legal Ease
offers protection against a negligent recommenda- tion claim because the business relationship between the brokerage firm and the lender is fully disclosed and the buyer is told that he or she is free to hire any lender of his or her choosing.
CAN A REALTOR® EXPLAIN TO A CLIENT BASIC TERMS
AND CONCEPTS RELATING TO MORTGAGE LOANS SUCH AS DISCOUNT POINTS, ORIGINATION FEES, PAR, SELLER CON- CESSIONS, GOOD FAITH ESTIMATE, CLOSING COSTS, ETC.? Most buyers cannot buy a home without getting a mortgage loan. REALTORS®
often explain to clients
and customers basic loan terms and concepts to help them through the loan process and get them to better understand their duties to get a loan under a pur- chase and sale contract. Providing such basic expla- nations to clients and customers should be permitted on the theory that doing so is not finding, placing or negotiating a loan.
A REALTOR should ®
also be able to provide a buyer with a basic
explanation of different types of loans without being required to be licensed as a mortgage lender.
CAN A REALTOR® A REALTOR® EXPLAIN THE DIFFERENCES BETWEEN DIFFERENT TYPES OF LOANS? should also be able to provide a buyer
with a basic explanation of different types of loans without being required to be licensed as a mortgage lender. So for example, a REALTOR®
should be able to
explain the differences between a fixed rate loan and an adjustable rate loan or a conventional loan versus an FHA/VA loan. REALTORS®
have always played an
important role in educating buyers on different types of mortgages. Again, this function should be permit- ted on the theory that it is not finding, placing or ne- gotiating a specific loan for a buyer.
WHAT THINGS THEN ARE CONSIDERED TO BE FINDING, PLACING OR NEGOTIATING A LOAN FOR ANOTHER? The law clearly prohibits a REALTOR®
stand what REALTORS® should avoid doing. EXAMPLE 1: A client tells his REALTOR® that Lender
A is offering to reduce his loan origination fee on a mortgage loan by half a percent as a way for Lender A to get the client’s business. The client then tells you that he prefers Lender B and would chose Lender B if only she would reduce her origination fee by half a per- cent. Can the REALTOR®
approach Lender B and ask
her to reduce her loan origination fee? ANSWER: The answer to this question is likely no
since this would be seeking to change one of the pro- posed terms of the loan and would thus be viewed as negotiating a mortgage loan. Therefore, the borrower will have to do his or her own negotiating on this issue. However, a REALTOR®
should be able to make the
buyer aware that certain fees may be negotiable as part of the process of educating the client. It is less clear what constitutes directly or indirectly
finding or placing a loan for another (and what public interest is served in criminalizing this behavior if done without charge by a REALTOR®
). Historically, REALTORS®
have played a positive role in looking over the shoul- der of mortgage lenders to protect against unscrupu- lous practices and help their buyer clients and cus tomers get the right loan, at a fair price and from a reputable mortgage lender. Therefore, any blanket prohibition against a REALTOR®
helping their clients
find a mortgage would appear not to be in the buyer’s best interest. However, until the law is clarified, changed or struck down, REALTORS®
should avoid telling buy-
ers to go to a specific lender to obtain a particular loan that they know the lender is offering. Instead, the REALTOR®
should limit his or her role to directing the
buyer to a lender where the lender then explains the different loans it can offer to the buyer. Let’s look at the example below to better under-
stand what should be avoided. EXAMPLE 2: Lender A comes to a sales meeting of
Broker A and explains the details of a new lease/pur- chase financing program. Under the program, Lender A makes a commitment to loan the borrower money 12 months in advance and allows the rent payment of the borrower in excess of the fair market rent to be applied towards the down payment on the house. Lender A then explains the interest rate and costs of the loan and compares them to its other types of loans. If a REALTOR®
in Broker A’s firm is working
with a buyer who can only qualify for a home if he obtains this specific loan, can the REALTOR®
tell him
about the loan? ANSWER: The safe answer is for the REALTOR®
to
limit his or her role to stating that there may be loans available to help buyers who need to do a lease/pur- chase. The REALTOR®
can then refer the buyer to the from negoti-
ating a mortgage loan on behalf of a client. While lit- tle negotiation takes place with most mortgage loans, let’s look at the following example to better under-
38 Georgia REALTOR®
lender who offers the program. However, the REALTOR® should avoid explaining the details of the loan pro- gram to avoid a claimthat the REALTOR®
was finding
a specific loan for the buyer. If Georgia’s law were identical to the model federal law, explaining the de-
JULY/AUGUST 2010
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