That is a great question, I have never been approached by a lender, but a buyer asked me for a rebate the day we met at the first property. I was told by another agent, that that was legal as long as it is disclosed. I thought that would be a kickback.
No, that's not legal. There are some fees that they might have been referring to that are not "commissions", and some of my learned colleagues have outlined them below - Steve with due diligence fees on commercial loans, Amy mentioned credit pulls and appraisals/inspections; those are legal, however - most established lenders will not charge for these items upfront. If they decide after taking an application that they will pay for those items, then it's a risk they are willing to assume - if the loan does not close, then it's written off as a cost of doing business. There's a lot of confusing terms with mortgages, so make sure you're clear that you're talking about a "commission", versus the myriad of other fees that could come into play. People mix them up all the time, and it's very understandable if you don't do it 10 hours a day to make a living.
The fee I've personally run across most frequently asked to be paid "up front" is the appraisal, and that was predominantly for re-finances. In residential lending, the appraisal is usually the biggest single cost for the lender, so the mortgage broker and/or lender usually wait until the deal has been negotiated out, as to the price and terms, and then usually wait until the home inspection has been done, too, and all the deficiencies accounted for. By then, they've also had the file open for a good month or so, and they have more of a history with the applicant and agent. That gives them more confidence in assuming the risk (ie, paying for) of ordering an appraisal. That being said, there is an extremely large lending organization that came from the tax preparation field, and their phone strategy used to be (especially for refinances) to ask the prospective customer to give them a credit card number so they could "order the appraisal" on the very first phone call. These were telemarketers, not loan officers. When I was a loan officer and spoke to a client the first time, I would frequently be told, "Oh, I already ordered my appraisal with so-and-so" (on the first phone conversation they had with them). So, there wasn't much we could do about that, these people were already into the company for some $500, and for all intents and purposes, tied into them. From the point of view of that large company, it was great business - lock in the client on call #1, and you're paying a telemarketer $125-150 a day to solicit $2000 to $3000 of appraisal business per day (gross, not net). And if the transaction went through, additional profit on top of that in fees and points. Not a very good idea for the consumer, ordering an appraisal before doing any background work whatsoever. I'm not sure if they still do that, I haven't originated loans full time for a few years now.
As a retired commercial mortgage banker I have never heard of any lender asking for a commission upfront before closing a loan. however it is common to be asked for a processing fee, or due diligence fee depending on the loan type and amount after review of a request though a Letter of Interest or terms Sheet.
I wouldn't pay a commission up front. If the loan is funded, I believe the broker/lender has a built in percentage for commission. That insures that if the deal is completed, they get the money. It should not be upfront.
I've had countless loans of various types over the years, & never was I asked for, nor did I pay anything up front, prior to the loan closing. There are far too many reputable lenders out there to fall for this. There seems to be some good ones here, but if you should need an intro to one or two, please contact me. I'd be happy to help.
As a PLM and Broker I speak from experience. There are laws in place which dictate what fees can be paid upfront. These fees only include the actual cost of the service. For example actual credit pull cost and appraisals/inspections. The Governing bodies do not allow for payment of commissions as an advanced fee, without a contractual agreement indicating they are refundable. Ergo it is against RESPA & TILA rules and regs to charge non-refundable commissions or advanced fees. Sounds like the Borrower needs to find a more reputable Broker/Lender. Feel free to contact me if you are in need of further explanation, I am always available to help.
Answers (1-10)
No, because you pay the fee and you probably most likely wont see a loan. Scammers are at a all time high all over the internet!
ABSOLUTELY NOT!
In commercial it is traditional to pay due diligence cost upfront, but the Loan Fee (commission) is always paid when loan closes. Hope this helps.
That is a great question, I have never been approached by a lender, but a buyer asked me for a rebate the day we met at the first property. I was told by another agent, that that was legal as long as it is disclosed. I thought that would be a kickback.
No, that's not legal. There are some fees that they might have been referring to that are not "commissions", and some of my learned colleagues have outlined them below - Steve with due diligence fees on commercial loans, Amy mentioned credit pulls and appraisals/inspections; those are legal, however - most established lenders will not charge for these items upfront. If they decide after taking an application that they will pay for those items, then it's a risk they are willing to assume - if the loan does not close, then it's written off as a cost of doing business. There's a lot of confusing terms with mortgages, so make sure you're clear that you're talking about a "commission", versus the myriad of other fees that could come into play. People mix them up all the time, and it's very understandable if you don't do it 10 hours a day to make a living.
The fee I've personally run across most frequently asked to be paid "up front" is the appraisal, and that was predominantly for re-finances. In residential lending, the appraisal is usually the biggest single cost for the lender, so the mortgage broker and/or lender usually wait until the deal has been negotiated out, as to the price and terms, and then usually wait until the home inspection has been done, too, and all the deficiencies accounted for. By then, they've also had the file open for a good month or so, and they have more of a history with the applicant and agent. That gives them more confidence in assuming the risk (ie, paying for) of ordering an appraisal. That being said, there is an extremely large lending organization that came from the tax preparation field, and their phone strategy used to be (especially for refinances) to ask the prospective customer to give them a credit card number so they could "order the appraisal" on the very first phone call. These were telemarketers, not loan officers. When I was a loan officer and spoke to a client the first time, I would frequently be told, "Oh, I already ordered my appraisal with so-and-so" (on the first phone conversation they had with them). So, there wasn't much we could do about that, these people were already into the company for some $500, and for all intents and purposes, tied into them. From the point of view of that large company, it was great business - lock in the client on call #1, and you're paying a telemarketer $125-150 a day to solicit $2000 to $3000 of appraisal business per day (gross, not net). And if the transaction went through, additional profit on top of that in fees and points. Not a very good idea for the consumer, ordering an appraisal before doing any background work whatsoever. I'm not sure if they still do that, I haven't originated loans full time for a few years now.
As a retired commercial mortgage banker I have never heard of any lender asking for a commission upfront before closing a loan. however it is common to be asked for a processing fee, or due diligence fee depending on the loan type and amount after review of a request though a Letter of Interest or terms Sheet.
I wouldn't pay a commission up front. If the loan is funded, I believe the broker/lender has a built in percentage for commission. That insures that if the deal is completed, they get the money. It should not be upfront.
I've had countless loans of various types over the years, & never was I asked for, nor did I pay anything up front, prior to the loan closing. There are far too many reputable lenders out there to fall for this. There seems to be some good ones here, but if you should need an intro to one or two, please contact me. I'd be happy to help.
As a PLM and Broker I speak from experience. There are laws in place which dictate what fees can be paid upfront. These fees only include the actual cost of the service. For example actual credit pull cost and appraisals/inspections. The Governing bodies do not allow for payment of commissions as an advanced fee, without a contractual agreement indicating they are refundable. Ergo it is against RESPA & TILA rules and regs to charge non-refundable commissions or advanced fees. Sounds like the Borrower needs to find a more reputable Broker/Lender. Feel free to contact me if you are in need of further explanation, I am always available to help.
All fees and associated cost should have been included with the loan. Once the loan closes everyone gets paid.