Why You Absolutely Need to Have a Broker Fee Agreement?

What is a broker fee agreement? It is the legal document in which you and the borrowers agree on your fee. By signing a fee agreement, you and the borrowers are memorializing the agreement on the amount of the fee, the circumstances under which it is earned, and other details about the transaction that may be required by state law. Most states not only require a broker fee agreement, but they actually have recommended forms for you to use. If your state does not have a recommended form, review your state’s requirements and have your attorney draft an agreement that complies with that law.

If your state requires a written fee agreement, that is signed by the borrowers, failure to have one in each applicant’s file can expose you to penalties and fines when your files are examined, or if a borrower complains to your banking department about any aspect of the transaction. Even if the complaint has nothing to do with your fee, the banking department will ask you to submit copies a certain documents in the file, always asking for the broker fee agreement.

But even if your state does not require a written broker fee agreement, why should you have the applicant sign one anyway? Because a written agreement protects you. You do a lot of work to find the best loan for your borrowers, you have to keep up-to-date with all of your lenders’ programs, and when you do work, you want to be paid for it. When a borrower signs a broker fee agreement, you now have the basis for enforcing the agreement that you entered into. A court will give great weight to the terms of a written agreement and it is much easier to win a lawsuit or defend yourself against a complaint from a borrower if you have a writing that the borrower has agreed to.

If you are using Calyx or other software to generate your documents, you must review their form and ensure that it complies with your state’s requirements and does not contain any blanks that must be filled in. If there are blanks that must be completed, you must make sure that your loan officers complete the forms properly and keep an original in the file.

It will be very costly for you to not have each loan applicant sign a broker fee agreement. Without a signed agreement, you are not entitled to collect the fee you ask for. Make sure every file has one to protect your interests.

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