Dual Representation in the Mortgage Industry – Can you be an MLO and a Realtor?
September 29, 2021
When completing a transaction for a property, usually there are two different agents present. There is a Mortgage Loan Originator and there is a Realtor. First let’s define what a mortgage loan originator, or MLO for short, is. An MLO is a person or institution that helps a borrower get the right mortgage for a real estate transaction. A realtor is a much simpler concept to understand. A realtor is a person who acts as an agent for the sale and purchase of buildings and land. You can also become licensed as both an MLO and a realtor. Sounds pretty good right? That way you can handle one housing transaction all by yourself. However, it’s not that simple when it comes to dual representation in the mortgage industry. For any given FHA transaction, you cannot act as both MLO and Realtor. However, for any given Conventional transaction, you CAN act as both. Why is this? Well, let’s go over the pros and cons.
Dual Representation: The Pros
As a both an MLO and a Realtor, you’ll carry more knowledge than either would by themselves. The most successful people are those that know every facet of their industry. You’ll always have areas to represent and you’ll always have knowledge concerning these areas. That means when you finish closing your realtor transaction in a new construction that you’ll be able to get started originating on the next property in the neighborhood. This allows you to diversify as well. Many successful realtors and MLO’s have degrees or certificates in areas that might not seem as if they would help their housing industry careers. Why not double dip in the best way possible? That brings us to “the cons.”
Dual Representation: The Cons
Truthfully, the number one question Realtors looking to get an MLO License and vice versa is the following: “Can I both represent the buyer/seller of a property AND originate the loan?” The short answer is: no when it comes to FHA loans and yes when it comes to conventional loans. Dual Representation is finicky in that way. It will present a conflict of interest. This is what’s known as a Section 8 violation. Section 8 states the following: “RESPA Section 8(a) prohibits kickbacks for business referrals related to or part of settlement services involving federally related mortgage loans. 12 USC § 2607(a); 12 CFR § 1024.14(b). RESPA Section 8(b) prohibits unearned fee arrangements, i.e., splitting charges made or received for settlement services, except for services actually performed, in connection with federally related mortgage loan transactions.” In layman’s terms this means that since you will be benefitting from both transactions, you will not be able to fulfill both duties.
At the end of the day, it’s still a good idea to be licensed as both an MLO and a Realtor. Do you want to get started on your MLO journey? Contact American Bancshares today. We’re a leading lender across the country, we know the ins and outs of the loan process better than anyone. Contact us to learn more about how American Bancshares can help you get started on your MLO journey today!