Questions about legality and concerns about leveling the playing field are both important when it comes to why mortgage service agreements are becoming less and less popular. It looks like the playing field is indeed leveling as less lenders make use of these agreements.
According to some loan originators, this is great news for the consumers as well as the lenders. It means that relationship building and networking are important again, giving some officers the chance to improve their delivery and others a chance to get into the market fairly for referral business.
Bear in mind that there’s no widespread ban on mortgage service agreements from the Consumer Financial Protection Bureau, the evaluation of these agreements is raising questions about whether consumers are actually reaping benefits from them. The focus of referrals going forward should be about the right fit for the consumer, not based on feeling obligated to throw business to a lender.
If MSAs totally disappear, the realtor and the consumer are now in the market for a loan officer who can provide the best service at the best price and in the most efficient manner. Many lenders already feel like mortgage service agreements are not that effective, which is why so many lenders have cut back on using them to the best extent possible.
Loan officers and real estate agents are only paid when a loan closes and a home closes. With the onus falling on officers to help speed things up while providing the best service, it sets up a scenario where everyone can win, especially the consumer. Lenders will win more business by being rewarded for a solid track record and efficient management of loans. Now referrals will largely be based on ability, transparency, speed, and pricing, rather than a “necessary evil” of referring business to one entity based on the potential for minimal profit margins. With the CFPB on board looking into these agreements, those who have not already tried to phase out the agreements are determining that it’s not worth the extra risk. When asked what they looked for in a lending partner, realtors around the country agreed that communication was key rather than money.