Disclosure of Mortgage Loan Broker Fees — By a Sales Transaction Broker — RPI Form 119-1

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This form is used by a seller’s agent when employed by a property owner as their sole agent for a fixed period of time, to list the property for sale, locate a buyer and sell the property.

Your use of RPI Form 119-1

Disclosure of second fees

Any broker participating as an agent in a sales transaction who expects to receive a fee other than the sales fee, such as loan broker fee or any other fee evolving out of the related mortgage origination, uses a Disclosure of Mortgage Loan Broker Fees form to advise the client of the additional earnings. [See RPI Form 119-1]

Consider an agent representing a buyer in a sales transaction. In addition to performing the regular agency duties owed to the buyer, such as using due diligence and coupling information known to the agent with specific advice to the buyer, the agent intends to receive an additional fee in connection with the buyer’s loan.

To concurrently act as a sales transaction agent and, by necessity, perform mortgage related activity in expectation of an additional fee, the agent and their broker needs to comply with two tiers of law.

The first tier is the federal Real Estate Settlement Procedures Act (RESPA), also known as Regulation X. RESPA establishes a no-service, no second-fee restriction on real estate brokers and agents who are already acting on behalf of a buyer or seller in a one-to-four unit residential real estate sales transaction financed by a RESPA mortgage, called consumer mortgages which excludes business, investment or and agricultural mortgages.

In application, a broker already receiving a fee for participating in a sales transaction may only receive additional fees related to the origination of a mortgage to fund the sales transaction when the broker (or their agents) performs significant services to process the mortgage. Thus, the broker or their agents need to perform some meaningful activities as a mortgage loan broker (MLB) in arranging or processing the mortgage.

Thus, a broker may only receive a second fee in addition to their sales transaction fee when they or their agents render significant mortgage origination services which otherwise are performed by the lender. Mere referral of the buyer to a lender by a transaction agent does not justify the additional fee, which would then be a prohibited kickback to the broker. [12 United States Code §2607(c)]

As the second tier set by state law, the broker in a sales transaction who is to receive an additional fee related to mortgage services must, as the agent for either the seller or the buyer, disclose to their client all forms of compensation they are to receive arising out of the transaction. This, includes the dollar amount of compensation and the source of payment. [See RPI Form 119]

However, when a broker is conducting mortgage origination services on behalf of the buyer (or the lender) needed to justify collection of a second fee, the second fee needs to be acknowledged by all participants to the sale and mortgage transactions, including the buyer, seller and lender. [See RPI Form 119-1]

Brokers or their agents have 24 hours after undertaking the mortgage processing activity in expectation of a second fee to disclose the expectation of that second fee, and before proceeding to further represent the client, obtain the consent of all participants. [See RPI Form 119-1]

Analyzing the disclosure of mortgage loan broker fees

An agent uses the Disclosure of Mortgage Loan Broker Fees – By a Sales Transaction Broker published by RPI when acting as a transaction agent in a sale of property and receiving a separate additional fee from the mortgage lender or the lender’s representatives (MLB & MLOs). The form allows the agent to disclose to all parties the receipt of a mortgage-related fee in addition to a sales fee on the transaction. [See RPI Form 119-1]

The Disclosure of Mortgage Loan Broker Fees; By a Sales Transaction Broker contains:

Facts: the type of transaction, date of the agreement, relevant real estate, and identities of the buyer, seller and lender [See RPI Form 119-1§1 and 2];
Loan transaction related to the sale: the purpose and amount of the mortgage loan [See RPI Form 119-13];
Disclosure of additional compensation: the source, form and amount of the broker’s anticipated second fee [See RPI Form 119-14]; and
Signatures of the broker, buyer, seller and lender. [See RPI Form 119-1§6 through 9]