Must use specific bank says broker?

Sounds shady. I would run it by a real estate lawyer you trust. If you don't know any, ask for referrals from people whose judgment you trust.

It's illegal.

I've never heard of this. Agree to nothing without counsel reviewing it. And get a RE attorney--not someone who handles 2 closings a year.

the broker might receive an illegal kick-back from the person at the bank...

v

I was in a similar boat. After my offer was accepted the listing agent changed the wording in the offer letter, that the seller would waive the finance contingency if I applied for a mortgage through so-and-so. I was infuriated. My attorney said that although it's shady, it would be difficult to prove anything illegal. And at the time (4 years ago) this practice was not uncommon.

Figuring I had been looking for a while and this unit had everything I wanted at the right price, and that I'd get screwed one way or another no matter where I'd buy, I bit the bullet; also the letter said' I'd only have to appy for the mortgage, so max I'd be out is the application fee.

Turns out I was also able to negotiate more favorable terms in my contract in my contract and locked in a good rate for my mortgage.

The market is probably very different today. Buyer23, how exactly is this broker 'insisting'? and do you have a signed contract yet? If not I'd walk away. They should be happy you're even talking to them.

I answered this on another thread, I think this is probably a violation of the Real Estate Settlement Procedures Act and therefore illegal.

Get an attorney.

ali r.
{downtown broker}

Seriously, just say no. Its a buyer's market -- why let some broker push you around.

Ali, under RESPA, a buyer cannot be 'required' to use a certain lender, but it IS legal for the selling party to offer incentives if you go with a certain lender. What the seller cannot do is offer you a higher price on the unit if you go with another lender. Sneaky and unethical, but not illegal. Blatent kickbacks are illegal but difficult to prove, esp if the broker's sneaky.

In my case I had a choice; I could've said no and risked having my place appraised below price. This is why I asked the OP HOW exactly the broker is 'insisting'. Could just be agressively selling/blowing steam or offering an 'incentive'.

blah, I get your point, but still . . .ick. It just shows RESPA has holes you can drive a truck through. I think it's also legal for brokerage firms to create "joint ventures" with banks to make customized mortgage lenders that they then steer their clients to.

But even if it's legal to steer the customer in a certain direction, it still feels dirty. One thing to say, "here are a couple of guys I like, check 'em out" and quite another thing to take the customer -- whose trust you have probably earned by this point -- and give 'em a shove in one direction only. It feels like "tying" even if it's technically not.

ali r.
{downtown broker}

When I bought my first apartment in the 90s - the coop had less than 50% owned by non sponsor shareholders. Citibank was the ONLY lender that would lend into the building. Maybe this is the point?

d

Ali, I totally agree with you. I was just pointing out the technical aspects of the law, and why/how some brokers can get away with this.

One explanation I received at the time from a trusted source was that only certain mortgage companies know how to deal w NYC coop loans and are timely in their processing. And it's not just in NYC, I know someone on the west coast who got duped from a broker into using a certain bank and ended up with a crappy mortgage (wasn't too savvy on their part and in that state RE closings don't require lawyers).

I think it's all bullcrud. And in this market the buyer doesn't have to deal with this. It creates bad will. Although the broker who sold me my apt is a great salesperson, there is NO WAY in HELL I would use this person in the future.

Manhattanfox, if Citi (or any other bank) is the ONLY lender, you'd find out soon enough. There should be no reason why you couldn't shop around.

Thank you for the insights.

Brings up another thought - in my business (broker/dealer), there are huge ramifications (ie. fines) preventing this type of activity, what we call, 'soft dollar', and other stuff we do, when selling securities to the public.

Ali, you sound like a good, ethical broker, but I'm appalled that the industry effectively allows these types of terrible antics towards people who are purchasing - not just one share of stock - but the single largest asset they will ever own.

A commercial here for Carolyn Warren's "Mortgage Ripoffs and Money Savers" which is a great book that I give all my buyer clients. Carolyn is a former mortgage broker who writes about all the ins and outs of the business and shows you how to avoid getting scammed. Highly recommended.

ali r.
{downtown broker}