Big Changes for Depository Lenders and Real Estate Professionals May Be on the Horizon.

With low rates and refinances slowing down turn times in the middle of the summer selling season, changes may be coming that are most likely not on your radar. Depository institutions may want to begin to develop a strategy for Transitional Licensing Authority that could change the originator pool. The real estate industry is being sued for anti-competitive practices and NAMB is calling for Congress to open the SAFE ACT! What has me interested is not just one, but the combined affect these could have on the entire housing market.

Effective, November 24, 2019 ALL ELIGIBLE originators will be able to continue to originate under Transitional Authority once they apply for a state-license. NMLS Registered originators will be able to step out of a bank and one day later begin originating for a state-licensed non-depository. Additionally under the same Transitional Authority, currently ELIGIBLE state-licensed originators will have the ability to begin originating in a new state. Eligibility requirements for both changes must be met. The shift may take some time, but as more and more Registered MLOS become aware of this opportunity, how will depositories handle the potential loss of originators and will state-licensed companies have open arms to bank LOS? What training have they had?

While mortgage employment decisions are being bantered around the pumpkin pie, looming in the background is a class action lawsuit filed in March 2019 in Federal Court, NORTHERN DISTRICT OF ILLINOIS. The suit was filed by Minnesota home seller Christopher Moehrl who claims “NAR’s compensation policies—which require all member brokers demand blanket, non-negotiable buyer-side commission fees when listing a home on a Multiple Listing Service—is a violation of antitrust law. NAR, Realogy Holdings, Home Services of America, RE/MAX and Keller Williams are all named in the suit. It would stand to reason that plaintiff’s attorneys may be on the hunt for more, eligible class action members—specifically those who have sold a home on a named MLS in the last five years.

The bells are sounding as many contemplate what could be a serious cleansing of the real estate community. “…Plaintiff brings this lawsuit as a class action on behalf of home sellers who paid a broker commission in the last four years in connection with the sale of residential real estate listed on one…” of 20 specific MLS systems. Consider that NAR alone has 1.3M members, which include other affiliates, non-licensed agents and brokers and there are approximately 600 MLS systems as of 2018.

So how does NAR respond? Two weeks ago, they filed a motion to dismiss. “In fact, the commission offered to the buyer’s broker is not at all determined by NAR or the MLS,” says Katie Johnson, NAR’s general counsel and chief member experience officer. “And, contrary to what the class action law firms allege, the commission is subject to negotiation.” We are going to aggressively defend ourselves, along with the rights that enable home buyers and sellers to continue to have access to a highly efficient market.”

I have been thinking about effect the Fed’s LO Compensation Rule had on mortgage professionals. In a perverse, DC kind of way, it seems likely and rational that real estate commissions would be the next target in our world of consumer protections; all while the door is swinging open for loan originators with new opportunities who will be looking for and expected to build relationships with real estate professionals. Hmmm…..

Lastly, add to the potential shift on June 27, 2019, the National Association of Mortgage Brokers (NAMB) issued a press release “asking its members, the entire mortgage industry and consumers in the United States to request that the U.S. Congress employ regulations that requires that all bank mortgage loan originators (LOs) be required to pass the SAFE Act mortgage competency test and additional requirements…” Presently bank mortgage loan originators are not required to complete education and testing to offer residential mortgages to customers.

For the sake of full disclosure, my primary focus is on depository and non-depository originator education, I am a NMLS state-licensed loan originator #7657 in CT and FL, mortgage broker owner #7748 and hold a real estate salesperson license in CT. I am a member of NAMB, AIME and NAR.

Would love your thoughts. Or connect with me privately at deb@cloes.online. Constructive discussions and brainstorming always welcome!