REGISTRATION OF MORTGAGE BANKERS AND MORTGAGE BROKERS

The North Carolina General Assembly, during last summer's legislative session, enacted a law requiring certain mortgage bankers and brokers to register with the Commission of Banks. A "mortgage banker" is defined as a person or entity who, for compensation, either directly or indirectly advances, offers to advance or commits to advancing funds to an applicant for a residential mortgage loan. And a "mortgage broker" is considered to be a person or entity in the business of soliciting or offering to solicit, process, place or negotiate residential mortgage loans for others. In view of these rather broad definitions, the question has arisen as to whether real estate brokers and salesmen are subject to the registration requirement because of the acts and services which they perform for purchasers and sellers in the normal course of real estate transactions.

The law specifically exempts "any licensed real estate agent or broker who is performing those activities subject to the regulation of the North Carolina Real Estate Commission." However, the exemption does not apply if the agent or broker " receives direct compensation or income in connection with the placement of a mortgage loan" (emphasis added). The question then is whether the activities of a broker or salesman in a "typical" residential sales transaction constitute "placement" of a mortgage loan and whether the agent's brokerage fee or commission could be considered " direct compensation or income. " To answer these questions we must examine the role of the real estate broker or salesman in the typical or normal day-to-day sales transactions.

During the course of the typical residential sales transaction, the real estate broker or salesman will perform a variety of services for both the seller and the purchaser. Since most sales transactions are contingent upon the purchaser obtaining suitable financing, the agent will frequently assist the purchaser in arranging this financing in order to complete the transaction. This assistance, however, is normally limited to: estimating the amount of monthly mortgage payments; projecting the maximum loan amount for which buyers are likely to qualify; suggesting possible types of financing (VA, FHA, conventional, etc.); describing the loan process and procedures; and perhaps even recommending a lender or lenders for the purchaser to contact regarding financing. The agent may also assist the lender by coordinating various inspections and acting as liaison between the lender and the purchaser-borrower. At or following the closing of the transaction, the agent is compensated by the seller for having performed a complete range of services necessary to bring about the successful completion of the sale, including listing, advertising and showing the property, completing the offer to purchase form etc.

Within the context of this example of a " typical" residential sales transaction, the limited services performed by the agent in connection with the purchaser's efforts to obtain a mortgage loan would not appear to constitute " placement" of a mortgage loan as contemplated by the General Assembly. Nor would the payment of a sales or brokerage commission to the agent be considered "direct compensation" for the placement of a mortgage loan. Therefore, real estate agents whose activities with regard to assisting purchasers in obtaining home financing are limited to those described above would not be required to register with the Commissioner of Banks. However real estate brokers and salesmen who collect fees from purchasers for helping to locate mortgage financing or who provide services outside the scope of those described above are advised to contact the Commissioner of Banks concerning the registration requirement.

For additional information, contact the Office of Commissioner of Banks, P.O. Box 29512, Raleigh, North Carolina 27226-0512 (Phone 919/733-3016), Attention: Special Services Administrator.