Is RELO Legal?
Yes. RELO is fully compliant with RESPA.
Is RELO a Violation of RESPA Section 8 (Kickbacks and Unearned Fees)
We have all heard a million times that compensating a Real Estate Agent for a mortgage referral is a violation of RESPA Section 8. The critical part of that rule is the term ‘Referral’. Being compensated for a mortgage referral is absolutely 100% a violation of RESPA Section 8, i.e. illegal. So how is RELO legal?
Not a Mortgage Referral
There is no mortgage referral element or compensation in RELO. A RELO Agent is not referring a customer. Rather, the RELO Agent is acting as both the Real Estate Agent and the Mortgage Loan Originator. In RELO, on an eligible transaction you are the Mortgage Loan Originator of Record. Your name and loan originator license is on the mortgage application (aka 1003). The only loan compensation you can earn is on eligible transactions with you are identified on the 1003.
Excluded Transactions:
There are some loan types that are ineligible for RELO Funding. These are easy to identify and make up a small percentage of the mortgage market. Ineligible loan types:
- FHA, VA and USDA (Government Loans)
- These make up less than 18% of the purchase money mortgage market
Key Takeaway
A RELO Agent is a licensed Mortgage Loan Originator and an Employee of RELO Funding. A RELO Agent does not ‘refer’ customers. Rather the RELO Agent has dual employment as a Real Estate Agent and a Loan Originator. The RELO Agent receives Loan Compensation for transactions the RELO Agent is the Mortgage Loan Originator of Record, i.e. on the 1003.