NAR settlement might lead to more dual agents, but LOs are skeptical

During the Mortgage Bankers Association's advocacy conference last week, Bob Broeksmit, the trade group's president, floated the idea that the recent National Association of Realtors settlement, which will change the commission structure for real estate agents, may result in more dual licensed agents. What came after was a loud groan from the crowd. 

"There will be market reactions to the settlement and it will create openings for other business models where we want the buyer represented, but the seller may not want to pay 3% for a buyer's agent," he said. "One of those models could be that you, as lenders, license your loan officers as real estate agents and offer the buying agent service for less than 3% fixed fee."

He admitted it would not appeal to all. "Some of you will say 'I want nothing to do with that.' Others of you will say that is a great retention opportunity for my loan officers and the market will figure all this out."

During the panel, the room was filled with loan officers and production employees whose audible groans seemed to indicate that they did not like the idea of wearing two hats in a transaction.

But Broeksmit's words have been echoed by mortgage executives and advisors who have pointed out that dual employment will create more opportunities for loan officers and real estate agents going forward.

Paul Hindman, industry consultant, said he often suggests loan officers pursue a dual certification. 

"You don't want to use [the dual certification] against the relationships that you already have, but for the intellectual property that comes with being an advisor," Hindman said. "I think that it's only an enhancement to both your intellectual property and your transactional ability to get things done."

Some loan officers themselves, however, are not as enthusiastic about dipping their toes into the real estate industry. One of the main concerns, of course, is burning bridges with their real estate referral partners.

"Even if I wanted to get my real estate license, which I don't think I do, ruining relationships with my partners would be a concern of mine," said Sean Eagan, sales manager at Loandepot.

"A lot of originators get leads from real estate agents, and if a Realtor trusts you, they'll likely keep giving you deals," said Sergey Pokolodin, owner of brokerage Viva Mortgage. "A lot of loan officers who have been in the business for a while have a network of like 100 real estate agents that they communicate with and get business and it works out."

Another reason for LO cynicism is they have enough work on their plate as is and don't have time to add another role to their resume, some have said.

 "I might consider [getting a real estate license] to make an extra $2,000 just to write the contract," said Alex Naumovych, loan officer at Capital Bank Home Loans. "But not too much because you can't do two jobs perfectly. You can be a professional only in one thing."

Some point out that the two jobs are incredibly different and figuring out how to do both efficiently might be unrealistic.

"You could have some more dual agents following the NAR settlement, but I can't predict a wave simply because the skill set it takes to be a Realtor versus a lender is completely different," said Jon Overfelt, director of sales at American Security Mortgage Corp. "It's hard to do both." 

Fannie Mae, Freddie Mac and most recently the Federal Housing Administration allow dual licensing, though it has been a thorny issue in the past. Concerns have been raised of companies accidentally running afoul of Real Estate Settlement Procedures Act section 8, which prohibits kickback schemes.

Matthew VanFossen, CEO of Absolute Home Mortgage, thinks more dual agents will come to the forefront, "which is a natural result of the matter." Specifically, he predicts it will be real estate agents entering the mortgage space. 

"There will be a lot of extra commission that [real estate agents] are missing and maybe they'll want to move forward with their career and master the mortgage process," said VanFossen. "They might not be able to handle the full transaction, but what they could do is get a license and talk to the loan officers that they're already doing business with and form a lending team. I'll do a piece of the transaction and you do a piece of the transaction."

VanFossen guesses the groans that reverberated during the MBA conference were in reaction to compliance worries. Mortgage companies will have to be more stringent about making sure there are no RESPA violations and that business is ethically conducted for dual agents, he said.

"I've personally been advocating for the industry to be aware that it would be a really bad idea to have listing agents represent the buyer's mortgage, that's not a good idea because then you can see the max affordability, the max disposable income, the max excess assets of that buyer and know how much more that you can push,"added VanFossen.

NAR's proposed rule changes, part of its $418 million settlement, could eliminate buyer agents if homebuyers forgo representation to avoid those fees. That factor could make listing agents a stronger referral source for lenders, once updates are slated to go into effect in July. Some experts believe this will push many real estate agents out of the business.