In today’s competitive market, it is almost impossible to win over a buyer without partnering with a real estate agent. However, the question arises whether real estate agents can also be mortgage brokers. In other words, can a real estate agent be a mortgage broker? Read on to know more about this.
What is a mortgage broker?
A mortgage broker is a person or an entity that assists people in acquiring new loans. They are commonly called lending agents or loan agents. A mortgage broker works for lenders, banks, and other financial institutions, who want to increase the amount of loans allocated to them.
Lenders and banks can only work with mortgage brokers if they meet certain conditions, such as having an equity of at least 10% in their business.
They can also only work with licensed mortgage brokers, who have undergone a series of strict tests and are licensed to promote, arrange, and service mortgage loans. Mortgage brokers can also be an individual or a company that helps in the acquisition of home loans.
Can a real estate agent be a mortgage broker?
Real estate agents are not legally allowed to become mortgage brokers. Even if one were to argue that it is a gray area and there is no definitive answer to this question, the fact is that it would be unethical for a real estate agent to attempt this.
A real estate agent working with a buyer and a seller can create a mortgage agreement on their behalf. However, they cannot initiate a mortgage application on their own behalf. It would amount to the same as if they were to represent a buyer and a seller in a real estate transaction, and they would be breaking the rules of the real estate industry.
What The Regulations Say?
The Real Estate and Business Brokers Act, which is applicable to all real estate agents and mortgage brokers, has a section that prohibits real estate agents and mortgage brokers to act as a “dealer or agent for a third party in connection with the purchase or sale of a security”.
If a real estate agent were to obtain a client’s order to act as a broker, he or she could be fined Rs 50,000 and the broker could be fined Rs 1 lakh. A broker that acts as a broker without a client’s order could be fined Rs 100,000 or up to two years in jail, or both.
Why Is It Difficult To Be A Mortgage Broker?
Anyone can start a mortgage brokerage business. However, the Federal Trade Commission (FTC) prohibits unlicensed individuals from marketing the services of anyone who is licensed.
The only way to get licensed is to pass rigorous tests, and the process is lengthy. Furthermore, a mortgage broker cannot become a licensed mortgage broker unless he or she has a proven track record of handling loans for at least six months.
Now, if a real estate agent were to use their technical experience in handling loans to become a mortgage broker, they would have to undergo all the tests again.
Conclusion
Real estate agents are indispensable to one’s real estate journey. However, they cannot be a mortgage broker and must always operate as a broker. Even if the regulations seem to be vague and unclear, the fact is that it would be unethical for a real estate agent to attempt this.
A real estate agent working with a buyer and a seller can create a mortgage agreement on their behalf. However, they cannot initiate a mortgage application on their own behalf. It would amount to the same as if they were to represent a buyer and a seller in a real estate transaction, and they would be breaking the rules of the real estate industry.
