You asked if there is any law regarding real estate agents directing their clients to mortgage brokers affiliated with their practice and receiving a fee for doing so and if other states penalize this through fines or license suspension.

SUMMARY

Connecticut law prohibits a real estate agent from receiving a fee for referring a property buyer to a mortgage broker or lender. The Real Estate Commission may suspend or revoke a violator's real estate license. In addition to or in lieu of the suspension or revocation, the commission may impose a fine not to exceed $ 1,000 for the first offense.

Connecticut law permits a real estate agent to receive a fee for acting as a mortgage broker if disclosure is made to and acknowledged by the property buyer and the fee is (1) related to the services actually rendered, (2) not imposed for referring the buyer to a lender, and (3) paid directly to the agent rather than from the mortgage loan proceeds.

The District of Columbia, Pennsylvania, and Washington have similar requirements. The District of Columbia's Superintendent of the Office of Banking and Financial Institutions may (1) suspend or revoke a violator's mortgage broker's license and (2) impose a civil penalty of up to $ 1,000 for each violation. The Pennsylvania Department of Banking may fine any violator up to $ 2,000 for each offense. In Washington, a violator is (1) subject to a fine of up to $ 2,000 for each violation and (2) guilty of a misdemeanor, which is punishable by up to 90 days in prison, a fine of up to $ 1,000, or both.

CONNECTICUT

Mortgage Broker Referral Fee Prohibited

Connecticut law prohibits a real estate broker, salesperson, or other person engaged in the real estate business from receiving a fee, commission, or other form of referral fee for referring a property buyer to a mortgage broker, lender, or any person affiliated with a mortgage broker or lender. The law authorizes the Department of Consumer Protection to investigate real estate brokers, salespersons, and others acting in such capacities when (1) the Real Estate Commission requests an investigation or (2) a written and verified complaint alleging a prima facie violation of the referral fee prohibition is filed. The Real Estate Commission may suspend or revoke a violator's license. In addition to or in lieu of such suspension or revocation, the commission may impose a fine not to exceed $ 1,000 for the first violation (CGS 20-320a).

Realtor Acting as Mortgage Broker

Under Connecticut law, a real estate broker or salesperson, or person affiliated with him, receiving a fee, commission, or other valuable consideration for the sale of residential real property may receive a fee, commission, or other valuable consideration for negotiating, soliciting, arranging, placing, or finding a “first mortgage loan” for the buyer in connection with the same sale if a specific disclosure is made to the buyer (CGS 20-325c). "First mortgage loan" means a loan or an extension of credit that is (1) made to a natural person, the proceeds of which are to be used primarily for personal, family or household purposes and (2) secured by a first mortgage upon any interest in one-to-four-family residential owner-occupied real property located in Connecticut, which is not subject to any prior mortgages. It includes the renewal or refinancing of an existing first mortgage loan (CGS § 36-440).

The mortgage brokering fee must (1) relate to the services actually performed, (2) not be charged for referring the buyer to a mortgage lender, and (3) be paid directly to the broker by the buyer instead of from the mortgage loan proceeds (CGS 20-325c). The fee must be based on a reasonable hourly rate, which may accrue for any bona fide activity, including time spent with the buyer discussing financing options, completing applications, negotiating with prospective lenders, and performing underwriting activities (Conn. Agencies Regs. § 20-325c-4).

The disclosure must be made to and acknowledged by the buyer before he signs a contract with the realtor for mortgage brokering services (CGS 20-325c). It must include, in at least 10-point boldface capital letters, the following statement:

I understand that the real estate broker or salesperson in this transaction has offered to assist me in finding a mortgage loan. Additionally, I understand that this real estate broker or salesperson does not represent any particular mortgage lender and will attempt to obtain the best terms available within the mortgage loan market for my specific home financing needs. If the real estate broker or salesperson does not fulfill his fiduciary obligation I may file a complaint with the Department of Banking. I also understand that I may attempt to find a mortgage loan to finance the purchase of my home without the assistance of the real estate broker or salesperson, in which case I will not be obligated to pay a fee to the real estate broker or salesperson.

OTHER JURISDICTIONS

District of Columbia

The District of Columbia prohibits a mortgage broker from receiving compensation for negotiating, placing, or finding a mortgage loan if (1) he or a person affiliated with him is a real estate broker, agent, or salesperson in connection with the real estate that secures the loan and (2) he or the affiliated person receives compensation from the lender, borrower, seller, or other person, unless he provides the borrower with a written disclosure of dual capacity (D. C. Code Ann. § 26-1114(b)). The disclosure must be written in at least 10-point type and read:

We have offered to assist you in obtaining a mortgage loan. If we are successful in obtaining a loan for you, we will charge and collect from you a fee not to exceed ___% of the loan amount. This fee is in addition to any other fee we may receive in connection with the sale or purchase of the real estate that will secure the loan. We do not represent all of the lenders in the market and the lenders we do represent may not offer the lowest interest rates or best terms available to you. You are free to seek a loan without our assistance, in which event you will not be required to pay us a fee for that service. The borrower acknowledges having read and understood this disclosure of dual capacity and having received a copy hereof.

The Superintendent of the Office of Banking and Financial Institutions may suspend or revoke a mortgage broker's license if he or anyone acting on his behalf violates the above requirement. The Superintendent may also impose a civil penalty of up to $ 1,000 for each violation (D. C. Code Ann. § 26-1118).

Pennsylvania

Pennsylvania law prohibits a real estate broker or sales person who has received a fee, commission, or other valuable consideration in connection with a real estate sale or transfer from receiving a fee or other compensation for providing mortgage brokering services related to obtaining a mortgage loan for the real estate transaction that exceeds the maximum fees established by regulation. Any such fees charged must be (1) for actual services rendered in connection with originating a mortgage loan and (2) expressed in terms of dollars or as a percentage of the mortgage loan. A real estate broker or salesperson who is also a bona fide mortgage broker, banker, or loan correspondent has the option of being regulated by the banking commissioner, in which case he is not subject to the fee limitations (Pa. Stat. Ann. tit. 63, § 456. 311).

In addition, Pennsylvania law prohibits a real estate broker or salesperson from receiving a fee, commission, or other valuable consideration for providing mortgage brokering services unless he provides the buyer written disclosure, in at least 10-point boldface capital letters (Pa. Stat. Ann. tit. 63, § 456. 311(e)). The disclosure must read:

The real estate broker in the transaction who has offered to assist me in obtaining a mortgage loan has advised me of the following:

(1) He does not represent any particular mortgage lender; or the name of the mortgage lender he represents is….

(2) I am not required to obtain the mortgage for the purchase of the real estate from the mortgage banker whom the broker represents.

(3) The real estate broker has a fiduciary obligation to the seller, from whom he will receive a commission.

(4) Should the real estate broker violate any provisions of the Real Estate Licensing and Registration Act or the Mortgage Bankers and Brokers Act, I may file a complaint with the Pennsylvania Real Estate Commission.

The Department of Banking may fine any person who violates the above provisions up to $ 2,000 for each offense (Pa. Stat. Ann. tit. 63, § 456. 314).

Washington

Washington law prohibits a person from acting as a mortgage broker in any transaction in which (1) he acts as the real estate broker or salesperson or (2) another person doing business under the same licensed real estate broker acts as the real estate broker or salesperson unless, before rendering mortgage brokering services to the borrower, he provides the borrower with a written disclosure (Wash. Rev. Code Ann. § 19. 146. 0201(13)). The disclosure must read:

This is to give you notice that I or one of my associates have/has acted as a real estate broker or salesperson representing the buyer/seller in the sale of this property to you. I am also a licensed mortgage broker, and would like to provide mortgage brokerage services to you in connection with your loan to purchase the property. You are not required to use me as a mortgage broker in connection with this transaction. You are free to comparison shop with other mortgage brokers and lenders, and to select any mortgage broker or lender of your choosing.

In addition, Washington law requires a licensed real estate broker or salesperson who also acts as a mortgage broker to conduct his mortgage brokerage business activities and maintain his mortgage brokerage records separate from his real estate brokerage activities, even if they are conducted at the same location. The activities are deemed separate if (1) he clearly identifies each business by a sign visible to the public, (2) he physically separates the businesses within the office building, and (3) there is no deception of the public as to the separate identities of the brokerage business results. However, he does not have to physically separate real estate and mortgage brokering activities if the Director of Financial Institutions determines it would constitute an undue financial hardship and is unnecessary for the public's protection (Wash. Rev. Code Ann. § 19. 146. 0201(130(c)).

Any violation of the above requirements is an unfair or deceptive act or practice and unfair method of competition in the conduct of trade or commerce (Wash. Rev. Code Ann. § 19. 146. 100). Such an act is punishable by a civil fine of up to $ 2,000 for each violation (Wash. Rev. Code Ann. §§ 19. 86. 020 and 19. 86. 140). In addition, a violator is guilty

of a misdemeanor, which is punishable by up to 90 days in prison, a fine of up to $ 1,000, or both (Wash. Rev. Code Ann. §§ 19. 146. 110 and 9A. 20. 021(3)).

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