Co-Brokering Loans
The Division of Banking and Financial Institutions has issued the following interpretation of the Montana Mortgage Broker and Loan Originator Licensing Act regarding co-brokering loans:
Section 32-9-102, MCA states that a person or entity may not act or offer to act as a residential mortgage broker or loan originator unless licensed by the division. In support of the interpretation the division also references the definitions of "mortgage broker," "loan originator" and "originate" as outlined in Section 32-9-103, MCA. Mortgage broker means a person or entity that provides services for a fee as an intermediary between a borrower and a lender in obtaining financing for the borrower. Loan originator means "a licensed individual employed by a mortgage broker to assist borrowers by originating a residential loan." Originate means "to negotiate or arrange or to offer to negotiate or arrange a mortgage loan between a borrower and a person or entity that makes or funds mortgage loans; to issue a commitment for a mortgage loan to a borrower; or to place, assist in placing , or find a mortgage loan for a borrower."
The division has determined that co-brokering is only permitted between Montana licensed mortgage broker entities or mortgage broker sole proprietors or entities otherwise exempt from the licensing requirement. Additionally, both brokers must provide the borrower(s) with the disclosure required by Section 32-9-124, MCA. Please note that the Act does not give the division authority to grant an exemption to licensure. Exemptions are specifically granted under Section 32-9-104, MCA. An entity seeking clarification as to their licensing requirements or exemption status should contact the division at (406) 841-2920.
Be advised that if a complaint is filed regarding a co-brokered loan, the division will to look both mortgage broker entities for a response to the complaint, and both mortgage broker entities may be subject to administrative action and penalties should any violations occur. Please note that a person who acts or offers to act in any capacity as a mortgage broker or loan originator without a license in this state may face fines up to $10,000.
Before entering into any type of co-brokering or referral arrangements, please seek the opinion of qualified counsel as to the legality of such arrangements under RESPA.
For more information visit the Montana Department of Administration Division of Banking and Financial Institutions Licensing, Laws and Regulations online.