Separation of Mortgage and Real Estate

I was chatting with a borrower last week about some paperwork I needed to deliver to her.  She asked if I could send it via the real estate agent, who she was meeting the following day at the home inspection.  I told my borrower that wasn't usually done and we like to keep the real estate side and the mortgage side separate.  Here's why:

Let's say I'm working on a transaction and I need a Verification of Employment (VOE) from a borrower's employer.  This is a standard Fannie Mae form, completed by an employer, that confirms a borrower's employment details and income.  Ideally, we want the employer to send this form directly to my processor or underwriter.  We prefer that the form not pass through the hands of the real estate agent or the loan officer.

Why?  Because the real estate agent and the loan officer have a vested interest in seeing this loan close.  Neither one of us gets paid until it does.  And technically speaking, we could alter the form to make sure our borrower gets the loan.  Would we?  Of course not!  But we don't want to give the impression that we could have had the opportunity to do so.

It's important to have processes and procedures in place to prevent fraud.  Is it illegal for me to handle the VOE?  No.  Is it unethical for me to handle the VOE?  No.  Sometimes it happens.  Maybe the employer doesn't have a fax machine so he drops it off at my office.  But that is the exception rather than the rule. 

I'll give you another example...

Let's say my teenage niece called me one morning because she left her lunch at home.  She wants me to deliver it to the high school.  I drive over there on my way to work but the line of cars at the front of the building is long.  I text my niece and ask her to meet me behind the gymnasium instead.  As luck would have it, someone spots me handing a paper bag to a teenage girl behind the gymnasium.

Is that situation completely innocent?  Yes.  Could it look nefarious?  Sure!  That (among other reasons) is why I make it a practice not to hand teenage girls paper bags behind gymnasiums.  Not because it's wrong or illegal.  But because I wouldn't want to give anyone the impression that I could have had the opportunity to do anything wrong.

The moral of the story?  If a buyer asks you to handle the paperwork for their mortgage, make an informed decision based on the situation.  It's not illegal or immoral.  But you probably shouldn't make it a practice.

Also, be aware that some lenders will not accept mortgage paperwork that has passed through the hands of the real estate agent.  If, for instance, they see "Windermere Real Estate" on a fax cover sheet, that paperwork will be discarded.