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In recent years, a new trend has emerged in the mortgage and real estate industry: FDIC banks getting real estate agents their NMLS license and paying them a referral fee on loan transactions. While this model may seem appealing to commission-uncertain agents and loan officers looking for a competitive advantage during lean times, it’s not as simple as it appears.
I had firsthand experience working with a similar system a couple of years ago, where realtors had to go through all the licensing requirements, including the test, to obtain a DRE license. Despite having close to a thousand interested real estate agents, not a single one followed through with the process.
About a year ago, the FDIC lending model came out, claiming that agents only needed to get their NMLS license, which was supposed to be quick and easy, with just a few hours of education. However, it turned out that the agents had to complete a significant amount of continuing education, which was overwhelming for most. Even with a full-time in-house person keeping track of the agents’ progress, only 15 out of hundreds completed the licensing process.
Moreover, the agents who did complete the licensing had to do yearly continuing education, which began almost immediately. The FDIC banks have oversight regulation and enforcement from the Comptroller of the Currency, the FDIC, and the CFPB, making the process far more burdensome than what is typically dealt with at the state level.
Some FDIC banks have tried to simplify the process by not getting agents NMLS licensed, but instead licensing real estate brokers and running all their agents through the one licensed broker. In this scenario, the real estate broker gets part of the commission and pays the real estate agent a portion of that commission as well. However, this could be considered a RESPA violation, as the real estate broker is essentially acting as a loan officer and paying the real estate agent, who works for them.
The question remains whether this practice will be enforced, as the real estate industry is not as tightly regulated with punitive outcomes as the mortgage industry. Real estate brokerages may be looking for new revenue streams due to potential income losses from the Missouri NAR MLS-based class-action lawsuit and pending charges from the DOJ. However, proceeding with this model could lead to irreversible consequences for those involved.
From my experience, getting real estate agents NMLS licensed is not as easy as it may seem, and loan officers should not expect to sign up a million realtors and get rich quickly. The potential for enforcement actions that could affect one’s ability to write loans in the future is a serious risk to consider.
Ultimately, this trend highlights a common issue in the real estate and mortgage industry: prioritizing easy over right, and sometimes even legal. Realtors and lenders considering this path should proceed with caution. An alternative approach is to focus on doing better at your job by putting in a solid 40 hours and dedicating your mental acuity to making the right decisions and solutions within your chosen profession. While this requires work, it is a more sustainable and responsible path forward for the industry.