Joint ventures between real estate companies and mortgage lenders were all the rage several years ago — until the Real Estate Settlement Procedures Act (RESPA). Stories about outrageous fines and penalties, and even closures, hit the news as mortgage brokers and services were investigated by CFPB for violation of RESPA.
Yet with the advent of a new administration in Washington, DC, all this seems to be changing. While RESPA is still very much in force, there is undoubtedly a resurgence for mortgage brokers and lenders to join forces. Here’s why:
Capture more business. According to a recent survey, “Partnerships with homebuilders typically guarantee a higher percentage of customer business than similar arrangements with Realtors. Realtor joint ventures (JVs) typically show capture rates of 20 percent to 25 percent; builder joint ventures often yield capture rates of 60 percent to 70 percent or even higher.”**
Enter new markets. A joint venture with an established brand name can help a mortgage company or realtor accelerate its entry into a new market. “… it is a natural extension and it’s an adjacent growth opportunity in the mortgage business,” said John Campbell, an analyst who follows publicly traded real estate companies for the investment bank Stephens Inc.**
Competitive advantage. Transactions can be turned around faster by creating a seamless process between the two entities. Homebuyers not only appreciate the expedited and efficient process, they will also spread the word and become a loyal customer.
The good new is, joint ventures are popping up again on the real estate landscape. Case in point: Realogy Holdings Corp., the largest full-service residential real estate services company in the U.S., formed a joint venture with Guaranteed Rate, Inc., one of the largest independent retail mortgage companies in the country. The joint venture, Guaranteed Rate Affinity LLC, began doing business in June 2017. Today, homebuilders Lennar and Pulte own mortgage companies, while others have joint ventures with lenders, including KB Home and Stearns Lending.
While the benefits of a joint venture are many, so are the pitfalls. If your business isn’t well versed on RESPA, you could be hit with fines, or worse. Fortunately, there is something you can do to help protect your business, and achieve a successful, lucrative and longstanding partnership.
JVerify is a premier compliance management system designed to meet the compliance challenges of real estate and mortgage joint ventures at startup and throughout the life of the venture. Created by Strategic Compliance Partners — a leader in mortgage compliance management — JVerify includes protocols designed to prevent unlawful steering; annual risk assessments; review of marketing and advertising materials to ensure compliance with applicable laws and regulations; and client surveys that provide general feedback and monitor RESPA compliance.
JVerify is a small foundational expenditure to protect your significant, long-term investment — so you can enjoy the many benefits of your joint venture, today and tomorrow.