Three Favors for a Realtor Who Sends 60% of the Business
Trent originates in Georgia. A top-producing realtor, Ms. Okafor, sends him roughly 60% of his volume. On a Friday in September she asks three things for a client closing September 30: (1) date the loan application two days earlier than it really was so the file "has more time" before the disclosure clock; (2) leave the $750 per-closing "marketing payment" that her LLC receives from Trent's brokerage off the file so it "doesn't confuse the borrower at closing"; and (3) count the borrower's $2,100 per month of overtime income even though the employer's written verification states overtime is not guaranteed and has declined about 30% over two years. Trent's manager says the overtime "always gets approved" and that the marketing payment is "handled at the company level, not your problem." The borrower has already told Trent that without the overtime she cannot afford the payment.
1. What is wrong with backdating the application date, and which obligations does it distort?
Read the worked answer
Backdating is a false entry in a loan file, and the fact that the motive is a deadline does not soften it. The application date is not a formality; it triggers a chain of consumer protections:
- Loan Estimate timing. The initial Loan Estimate must be delivered or placed in the mail no later than three business days after application, and the consumer must receive it no later than seven business days before consummation.
- Closing Disclosure timing. The consumer must receive the Closing Disclosure at least three business days before consummation, and the three-day clock restarts if the APR changes beyond tolerance.
- Adverse action and file-integrity obligations. Application date drives Reg B timing and recordkeeping.
Moving the date two days earlier does not buy time; it fabricates a timeline that makes the lender appear compliant when it was not. The file becomes a misrepresentation to the investor, the insurer and any examiner who reads it. In Georgia, knowingly making a false statement in connection with a residential mortgage loan falls within the state's residential mortgage fraud provisions, and it is unquestionably a violation of the conduct standards attached to Trent's license. It also destroys his own defense: once the file is wrong, every later disclosure looks like concealment rather than error. Trent should refuse, in writing, and tell the realtor the closing date is what moves, not the paperwork.
2. Analyze the $750 per-closing marketing payment to the realtor's LLC.
Read the worked answer
A payment that is calculated per closing and flows from the brokerage to the party sending the referrals is a referral fee, whatever it is called. RESPA Section 8(a) prohibits giving or accepting anything of value for the referral of settlement service business on a federally related mortgage loan, and Section 8(b) prohibits unearned fee splits. Per-closing pricing is the fingerprint of a kickback.
There is a lawful structure, but it is narrow: a written agreement, payment only for goods or services actually furnished or performed, payment at fair market value, and no duplication of services the brokerage already performs. Even a well-papered marketing services agreement fails if the realtor does nothing measurable, if the payment rises and falls with referral volume, or if the amount bears no relationship to the value of the service. The proposed concealment also matters - an arrangement must be disclosed to the borrower under the affiliated business rules if the realtor is a settlement service provider receiving the payment, and hiding it removes the borrower's ability to evaluate the relationship.
Trent should refuse to touch the file in a way that suppresses the arrangement, report it to compliance, and expect the brokerage to review and probably terminate the agreement. Section 8 exposure includes treble damages, class claims and, in Georgia, licensing discipline for paying a fee to an unlicensed person for referring mortgage business.
3. How should Trent handle the overtime income, and what happens if he does what the realtor asks?
Read the worked answer
Overtime can be counted only when it is documented as stable and likely to continue. The standard evidence is a two-year history plus a written verification of continuance from the employer. Here the employer affirmatively says it is not guaranteed and it has declined 30% in two years - both facts point the other way. Trent may count only the portion he can support: the stable base, plus any overtime the employer confirms in writing will continue at a stated level. On these facts, $2,100 per month of overtime does not qualify, and Trent should not use it.
The borrower's own statement that she cannot afford the payment without the overtime is the decisive fact. Including it would put her into a loan she has told him she cannot repay, which is an ability-to-repay problem for the lender and a straightforward honesty problem for Trent. The right response is to find a loan that works on verified income - a lower purchase price, a different program, a co-borrower, more down payment - or decline the file.
If he inflates the income, the consequences run on several tracks: the borrower's signed application becomes false, the lender faces repurchase and indemnification demands, the loan can be rescinded or declared fraudulent, the borrower has a claim against everyone involved, and Trent faces license denial, suspension or revocation, civil penalties and possible criminal referral under Georgia's mortgage fraud provisions. "My manager told me to" is not a defense; a licensee is personally responsible for the accuracy of what he submits, and an instruction to violate the law is itself a reportable event.