Thursday, July 29, 2010

Is it illegal to do Real Estate and Mortgage Loans?

I heard that a well known real estate company was doing both loans and selling real estate and they were arrested recently. Is there a law that prohibits this practice. If you are licensed must you chose one or the other?Is it illegal to do Real Estate and Mortgage Loans?
I know several agents that are mortgage brokers and real estate agents... it is not illegal.





They can NOT force you to use them for the mortgage, and if they give you ';cash back'; from their commission if you use them... their could be legal issues with that.





But offering you a mortgage as well as being your REA is perfectly fine.Is it illegal to do Real Estate and Mortgage Loans?
In California it is not illegal to do both. I have a company that sells real estate and I do the loans for my buyers when they purchase a home. In fact I have a slogan for my business.


';List with me and your home loan is FREE';. If a person lists with me and I sell their home, I will do their purchase loan for free. Now that means that I will make no money on their loan at all. That usually gives them a rate that is .5 below the going rate for nothing. On a $1,000,000 home, I usually save a buyer around $20,000. Not bad and not illegal.
No it is not illegal to do real estate and mortgage. They can go hand in hand if handled properly. As long as the Broker has a license to do both it is fine. Did you also know that well know real estate companies are like franchises which means one office might do both real estate and loans and another just real estate.
Of course not.





How do you ';arrest'; a company??
I sell real estate and mortgages in CA. That company must have been doing something illegally.
Each state has their own rules. In utah its illegal, you have to pick one or the other. But there are about 18 states in the US that dont even license Loan Officers. So clearly in those states it wouldnt be an issue.





It would change state to state. It was legal to do both in Utah until about 2 years ago. Now you cant. Call your states Dept of Real Estate and ask them.





But I cant beleive they arrested somebody for it, in any state. They probably got arrested for something else.





Hope this helps





*update*





Seriously, check your state. The States run if you need to be licensed and give rules on this. Most people are saying its perfectly fine, I would have said the same thing 2 years ago. I know of 7 states you cant do it in, but most states I would assume its legal from the responses. Im sure everybody that said its legal is right, but its only right in their state.
It is legal to sell and fund real estate. There must be other illegal dealings for it to encounter legal trouble.
The same owners could set up as many companies as they want even if not the same company.


Kiel Real Estate and Kiel Mortgage company have commercials that both say with a K and an I and an E and an L then the name of the company. The voice is even the same but they aren't probably the same company even if they share office space or employees.
It is legally possible to do both, but it's difficult, and often done wrong.





Most agents wouldn't know how to be a loan officer if their life depended on it. So everyone tries to skirt the rules and pay the agent for doing little to no actual work. That's where it can get to be illegal, and be considered a ';kickback';.





There's also licensing issues that could've been ignored or done improperly as well, usually on the mortgage side. They may not have had the agents as W-2'd employees of the mortgage company, which is almost always a requirement and one that most agents don't like, considering most of them are already 1099 contract employees for their real estate.





But it's unlikely they'd actually be arrested for this. They'd get shut down with a cease and desist order first. Even if they broke that, I don't know if that's an arrestable crime, or simply something that they can get civil fines and censures for.





There might be much more to it than you heard.
It's not illegal just open for fraudulent practices. It's too easy to create wrongdoing or the appearance of wrongdoing if there isn't an arms length relationship. So if there was an arrest and I don't know what state you are in, they probably stepped way over the line to the point where they got called down for it. Every major franchise that I know has an in house lender (mortgage company or mortgage banker and they have a piece of that pie as income.) They would not jeopardize their main business if there was any possibility of an issue.
Not at all... most real estate offices have ';mortgage companies'; as well.

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