Can You Lend a Hand with the Mortgage Process During the Real Estate Transaction?

Nooks and Crannies revisited

In January we told about a case in which a two-week summer tenant was trying to hold Prudential Fox accountable for existing code violations (an inconspicuous and unexpected drop from a master bedroom doorway onto an outside deck which had no handrails) which lead to a fall and injury. At that time, an Appellate Court upheld a trial court’s dismissal of the case, determining that the realtor had no obligation under current law to “search every nook and cranny” of rental property.

In the coming months, the highest court of this State will be offering its viewpoint on the issue. The Supreme Court recently heard oral argument from attorneys in the case, including one arguing on behalf of the New Jersey Association of Realtors. Central to the court’s decision will be whether to expand Hopkins v. Fox & Lazo, a 1993 case in which a realtor was held liable for failing to warn a person of a hard-to-see step while at an open house. In discussing the case, one Justice asked “Would any defect be sufficient for a broker to be held liable?” Counsel’s response: “There could be, but I can’t think of one.” “What if the door opened to nothing?” the Justice inquired. Counsel seemingly conceded by answering “Potentially, yes”.

What would be your answer?


Can you lend a hand with the mortgage process during the real estate transaction?

Under NJSA 17:11C-4(d), a “person licensed as a real estate broker or salesperson . . . and not engaged in the business of a mortgage banker or broker” is exempt from the requirements applicable to licensed mortgage bankers, mortgage brokers or mortgage solicitors. This exemption is spelled out more explicitly in N.J.A.C. 3:15-2.1(b), which states that a real estate broker or salesperson is not deemed to be engaged in the business of a mortgage banker, correspondent mortgage banker or mortgage broker if:

1. the real estate broker receives $250 or less at the closing of the mortgage loan for reimbursement of expenses incurred in providing specific mortgage related services in connection with a particular real estate sale or real estate brokerage service;

2. the real estate broker itemizes in writing the specific services provided by the real estate broker or by the salesperson licensed with the broker and submits that itemized list to the mortgage lender prior to closing; and

3. the real estate broker or salesperson receives a real estate commission in connection with the transaction.

The regulations also provide detail as to what is a “reimbursable expense”, i.e. what gets you up to the $250 ceiling. Basically, any expense that is exclusively attributable to the real estate broker’s mortgage related services is a reimbursable expense. In addition, time spent by a real estate broker providing specific mortgage-related services counts towards the reimbursable limit, provided that the reimbursement shall be paid by the mortgage lender directly to the real estate broker; and the reimbursement shall be in the amount itemized in the written statement given to the lender prior to closing.


So what does all this mean? Under the mortgage licensing statute and implementing regulations, you don't need a mortgage banking or mortgage brokers license to assist with the mortgage banking if you (1) receive $250 or less for mortgage-related services (per closing), (2) itemize in writing the specific services performed and submit it to the lender prior to closing and (3) receive a real estate commission in connection with the transaction. If any one of those three things is not present for the transaction, then you do not qualify for the exemption and will be in violation of the mortgage license requirements. If you want to make more than $250 per closing for mortgage related work, then you are going to need a mortgage broker license. But if your work consists of making referrals, helping the buyer gather information and fill out paperwork, for which you receive less than $250 from the lender or any other person, then you're in the clear.

-Dan Posternock

***The information included in this newsletter is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.