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Are agents getting kickbacks for mortgage, escrow referrals?
By Jeff Lazerson
What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.
Rate news summary
From Freddie Mac’s weekly survey: The 30-year fixed averaged 4.28 percent, down 3 basis points to the lowest average since Feb. 1, 2018. The 15-year fixed rate averaged 3.71 percent, down 5 basis points from last week.
The Mortgage Bankers Association reported a 1.6 percent increase in loan application volume from the previous week.
Bottom line: Mortgage payments now are lower than this time last year. Assuming a borrower gets the average 30-year fixed rate on a conforming $484,350 loan, last year’s payment was $49 higher than this week’s payment of $2,291.
What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages at a zero point cost: A15-year FHA (up to $431,250 in the Inland Empire, up to $484,350 in Los Angeles and Orange Counties) at 3.255 percent, a 30-year FHA at 3.50 percent, a 15-year conventional at 3.375 percent, a 30-year conventional at 3.875 percent, a 30-year FHA high-balance (from $484,351 to $726,525 in L.A. and Orange counties) at 3.875 percent, a 15-year conventional high-balance (also $484,351 to $726,525) at 3.75 percent, a 30-year conventional high-balance at 4.125 percent, a 15-year jumbo (over $726,525) at 4.0 percent and a 30-year jumbo at 4.625 percent.
What I think: Last week, on the heels of the college cheating scandal, two people approached me at a Realtor meeting. They complained about the increasing difficulty of getting home-loan applicant referrals and escrow-transaction referrals from real estate agents unless one is willing to pay referral fees or kickbacks to capture those deals.
And, they wanted to know, when would I be writing about this?
When it comes to real estate agents and brokerages, pay-to-play offers come in different forms. It could be solicitation of cash, sponsoring a golf weekend or a weekend sales seminar. It could be paying for the marketing materials or hosting lavish open house food spreads.
All of this goes on behind the scenes — well under the radar of homebuyers and home sellers and raising questions about the credibility of agent referrals.
It’s impossible to know how much a kickback adds to the cost of buying or selling a home, but you could infer that someone pays more when they hire providers without shopping around and getting the most competitive rates and prices.
Former Consumer Financial Protection Bureau attorney Richard Horn, now of Garris Horn, points to the 1974 Real Estate Settlement Procedures Act, which is in part an anti-kickback statute. Horn thinks the CFPB should do some economic research to better understand what kickbacks are costing consumers.
California has about 420,000 real estate licensees. The California Department of Real Estate received 20 complaints about kickbacks over the last eight years, according to Chika Sunquist at the DRE.
“Don’t assume the DRE knows about it,” said Summer Goralik, former DRE investigator and now a real estate compliance consultant. Goralik says law-abiding realty agents and settlement service providers “need to flood the DRE with complaints. Even if you do it anonymously, provide as much detail as possible.”
Consumers: Always shop around. It may make your house much more affordable.
" If you prefer to select one loan provider rather than spend time shopping, Mortgage Grader looks like a good choice" - Washington Posts
Website May Lead to Fairer Loans
"It's a noble proposition; getting folks a square deal on a mortgage using the ubiquity of the internet." -Jonathan Lansner, Business Columnist
"My post was about the difficulties inherent in getting consumers to choose this superior model for getting financial advice."
- Justin Fox, Business and Economics Columnist