Is Your Mortgage Broker Allowed To Originate An FHA Loan?

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Summary: Can a mortgage broker originate an FHA loan if he or she also has a real estate license? The FHA prohibits brokers who are "actively selling" real estate from getting FHA loans. However, the eligibility requirements for FHA lenders don't address real estate licenses. If you're a mortgage lender, but you have a real estate license from a previous career, it may not prevent you from originating an FHA loan.

Question: I was told that if you have a real estate license and a mortgage lenders license you can't originate FHA loans. Is this true?

Answer: There is not a specific regulation that we could find in the FHA handbook prohibiting someone with a real estate license and a mortgage lenders license from originating an FHA loan. In other words, you can be a real estate agent and a mortgage lender and originate an FHA loan. But the spokesman for the FHA said that active real estate agents who were also active mortgage lenders might not be able to originate loans. Ilyce Glink suspects this is because of the dangers in having a one person play too many roles in the same transaction: It would be too easy to pump up the selling price of a house, then get an FHA loan to cover it, browbeating an appraiser into giving you the value you want for the property, Glink added.

However, a spokesman for the FHA said that anyone "actively selling" real estate could not get an FHA loan (as a buyer). He said the rule came about because they were uncomfortable with people getting loans from FHA plus any commission from the real estate transaction.

The eligibility requirements for mortgage lenders in the FHA handbook does not specifically prohibit lenders who still have real estate licenses from applying for an FHA loan. It seems that if you have a real estate license from a previous career, but you are not actively selling -- you are not the sellers agent or buyer's agent for the property -- you should still qualify for the FHA loan.

This rule in the FHA Handbook about receiving the loan reads that a CO-borrower or CO-signer cannot be a real estate agent, but under the rule that covers Ineligible Borrowers, there is no mention of a borrower having a real estate license or a mortgage lenders license.

It appears that if you have a real estate license and a mortgage lenders license, you must pick one side to use an FHA loan. You are only eligible for an FHA loan if you are the active agent on either the mortgage or the real estate sale side.

Please leave comments here if you have any more information concerning this topic, or if you have had a similar experience with FHA loans.

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Related Topics

• FHA loans, 
• mortgage, 
• mortgage lenders, 
• mortgage loan, 
• real estate, 
• real estate agent

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