This is a disturbing practice that is surfacing more and more.
You work hard for your borrower and help them obtain the mortgage loan they need. It is either a purchase or a refinance, and the borrower never says anything to you about intending to pay off their loan within a year. You probably signed your broker-lender agreement without asking us to review it for trap doors like this so………the contract has a clause in it allowing your lender to claw back your hard-earned fees no matter where they came from (borrower OR lender paid) and no matter why the client paid off early.
Constructively, this is a broker prepayment penalty. The regulations never considered this. The regulations protect the consumer, and then the lender shifts the penalty to you. You probably did not know this penalty was in your contract because it likely was not explained to you when you signed your contract. Did they ask you to initial each page?
When you work hard to originate a mortgage loan you deliver something of value. You deserve to be compensated. If your borrower decides without any warning to prepay the loan, they got the benefit of your hard work for what amounts to nothing. Work without pay is called unjust enrichment. Under quasi-contract the borrower owes you for the claw back the lender assessed you with. You earned your fee.
What can you do? I don’t see a problem with a broker-borrower contractual agreement that requires the borrower to indemnify you in the event the borrower decides to pay off early. It is an advanced informed agreement. If you are our client we can provide this to you at no cost. If you are not our client but would like to learn more, contact us at (800) 656-4584. Or email us at firstname.lastname@example.org
This is just one example of the pro-broker things we do to help our clients make and retain their earnings.
That’s all for now.
Nelson A. Locke, Esq.
Compliance Services USA