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With the CFPB cracking down on Marketing Services Agreements (MSAs) many lenders exited such agreements with Realtors and Builders. These are Agreements that were intended to increase business to the lender and provide some additional income to the Realtor and Builder.
For some, it was nice while it lasted. For others, they were glad to see the MSAs go away. They believed it was just a way to circumvent the referral rules. Regardless, if you’re in an MSA now you better be very careful of its structure and how the business is conducted between entities.
Someone is always looking to build a better mousetrap. No different in the quest for one stop shopping in housing and mortgage lending. After all, the majority of home buyers need a mortgage. Why not get it from the same company that sold them the home? Remax has the plan. (Motto Mortgage)
Remax, a leader in Real Estate Sales franchising, is planning to do the same for mortgage lending. Under their Motto Mortgage plan, Remax will not own or share in a Mortgage Broker business, they will provide a franchise for such operations. Just as they do for Real Estate.
As a franchisor, Remax does not need to get licensed as a mortgage lender. They’ll provide their franchisees all the marketing and support to set up and operate as a Mortgage Broker for an upfront fee, plus a flat pre-determined monthly franchising fee. The entity buying the franchise then must meet all the licensing requirements to do mortgage lending.
As fees charged by Remax for a Motto Mortgage franchise are not determined by business type or volume, there appears to be no RESPA violation.
The entity is just purchasing a franchise to do mortgage business and in return receives certain marketing and business management support, which may include access to products and pricing. Ultimately, it’ll be up to superior legal minds to determine if the program is legal. Remax believes so.
So what might this mean to mortgage lending?
- ReMax owners can purchase a Motto franchise and set up their own separate mortgage broker business.
- What happens to the lenders currently servicing those Remax offices?
- Will Brokers scurry to become the Motto franchises for Remax offices?
- Will top loan originators take the opportunity to set up these franchises for the Remax offices, leaving their current companies?
- Is this what’s best for consumers?
- What about the integrity of lending when the real estate commissions are on the line?
Motto’s potential market is huge. Remax, with over 3500 real estate franchises, presently handles over 1 million transactions. That’s a whole lot of potential for mortgage lenders. These are loans that would go to the Motto Mortgage franchisees.
Here we go again. Is this a better way to service the consumer or just another way to circumvent the rules? In the end, will it benefit consumers or will it create the need for more restrictive regulations? I wonder how it is viewed by our friends at CFPB…
Sometimes, you may catch more than mice in that better mousetrap.
