I received this question a while ago from one of my subscribers:
As a lender, is it ethical to deny someone for a loan and then turn around and share not only that the loan was denied, but the EXACT reason the loan was denied (for example: too many NSFs, large deposit in checking account, hours cut back at work, etc.) with the applicant’s realtor as well as the listing agent who in turn shares it with the sellers?
It’s flat out wrong for a mortgage originator to share someones personal and private information. Sometimes mortgage originators may feel pressured to provide extra details by a real estate agent wanting the nitty gritty and the mortgage originator must decline, or perhaps they’re trying to score some brownie points. Even with “perfect” clients, agents may want to know details that a mortgage originator cannot and should not provide due to strict laws protecting the borrowers privacy. This is a perfect example of why I have an issue with mortgage originators also acting as a home buyers real estate agent.
I encourage borrowers I’m working with to discuss their situation with their agent and vice versa. There is nothing preventing a home buyer and real estate agent from having a conversation and it’s up to the borrower/home buyer to decide how much information they want to share. However, Dear Agents, please keep in mind that the home buyer may be embarrassed about their situation or may not want you to know their privates.
A mortgage originator can share with an agent that the borrower does have verified funds to close and is approved for the mortgage based on their credit, income and employment. These items may be addressed in a preapproval letter.
Real estate agents will often call me to ask about a potential home buyer who has an offer pending. A majority of the time, it’s really a “sniff test” to make sure that I answer my phone, return calls quickly and to verify that the borrower is actually preapproved. They may try to find out if the buyer can qualify for more and I have to decline answering. Many times, the buyer may qualify for more BUT the buyer wants to offer or buy less. Without instruction and permission from the borrower/buyer to reveal any of their personal information – mum is the word.
Stay tuned for Part 2; I have asked Jillayne Schlike of CE Forward to chime in on this subject.
I have three questions to ask. 1- Is a Mortgage broker allowed to discuss personal information to my realtor 2- is a Mortgage broker allowed to pull my credit anytime they want with out my approval 3- is it normal procedure for a Mortgage Broker to keep changing purchase sale agreement figures on the house payment
Stephen, thanks for your questions.
1. Loan Officers need to be very careful with what type of information they share with your realtor or anyone. We have strict privacy rules we have to abide by. I cannot share my clients private information without their permission. It can sometimes put lenders in a challenging position when a real estate agent wants more details about the borrower. In those cases, I will often talk to the borrower to let them know their agent wants that info and the borrower can decide whether or not they want to share it. For example, I have had circumstances where agents want to know what the highest amount is a borrower can qualify for or how money does the borrower have in the bank for down payment – it’s not for me to share with the realtor if the buyer only wants to be approved for a certain amount.
2. You may have signed an authorization for your lender to pull your credit. If your credit report has expired (90 days since the last pull) the lender may need to re-pull it. Check with your lender to see if you signed an authorization.
3. I’m not sure that it’s normal for a lender to change anything on the purchase and sales agreement. That would be between the buyer, seller and the real estate agents involved. It sounds like the lender is trying to help you qualify for the property you have an offer on.
Good luck!
the mortgage or loan person in my case gave information to my realtor . I was never notified by him, however, my real estate agent, emailed me to tell me she was very sorry, but she knew I was resourceful and would figure something out. I’ve contacted both for an answer and received nothing. Can I sue the loan person for breaking confidentiality and speaking to my real estate person and not me? What recourse do I have?
Nancy,
Did your loan officer share private information detailing why you were not approved for the mortgage? For example, did he tell the agent something along the lines of “your credit scores are xyz and your income is $$$ and she had a recent late payment and we can’t document a $10,000 deposit to her checking account…” or did he contact the agent before telling you that your loan was denied?
The loan officer should have informed you first before telling the real estate agent, that they were not able to provide you with a mortgage. In my opinion, if that’s the limit to what he did, it’s not worth suing over. It was thoughtless and not very professional.
I’m not an attorney and cannot give legal advice. If you want to sue somebody – it’s a free country.
Our mortgage broker is telling all our information to our real estate agent instead of coming to us. Then she tells us what to do. She knows how much money we have in the bank and everything about us. She gave us the mortgage company to use. Is this right that they tell her everything I feel this is not he business.
Hi Linda, I would instruct your Loan Officer not to share your personal information with the real estate agent if you do not want the agent knowing your information… this is especially critical if the real estate agent (or the company they work for) is the same as the listing broker. Good luck!
I specifically asked the lender to keep our information private. Our real estate agent wanted a closing disclosure, I didn’t see or read a reason why she needs the information. She said it was required by the commission but I find it hard to believe. I feel like the details of our loan is private information. Doesn’t she just need to know we are approved, the details are between lender, closing officer and us ? I am right in thinking this? Anyhow our agent went around us and ended up getting a loan estimate from our lender and we didn’t consent to either one to give/get this information…
Hi Elizabeth,
We only send the Closing Disclosure to the borrower and the escrow company. It’s not unusual to have an agent ask for a copy of the loan estimate. I think in most cases, they are trying to be helpful. I don’t provide this unless I have permission from my client, the buyer. I do keep all parties (buyer, selling and listing agent) updated as to the progress of the transaction – example, “the appraisal has been ordered” or “loan documents have been delivered to escrow”.
My wife and I applied for a VA loan for which we were pre approved. Our credit was pulled and we were told we were in great shape. We were told how much we would/could qualify for. We provided the earnest money. My wife was asked what our ethnicity was. We were then told to arrange for the inspections which we paid $570 for the house inspection and another $110 for the radon inspection. After the inspections we were told we would not be financed due to a federal tax lien. Didn’t the bank officer know that when he pulled our credit report. Now we are out the inspection monies we paid and the “vice president, bank loan officer became quite adversarial when we explained we had a 12 month faithful payment arrangement with the IRS. He claimed the bank would be fined for not being able to sell the loan after the closing on the house. Do we have any recourse at all?
Hi Anthony, Did you disclose that you have a Federal Tax Lien to your Loan Officer on the loan application? It’s possible that you may still be able to qualify since you’re making payments to the IRS. I recommend reaching out to LICENSED (typically non-bank) Loan Officer. If you’re buying a home in Washington state, I’m happy to help you.
Hi there! My husband and I are buying our first home it’s been a nightmare with our loan officer for multiple reasons but my question for you is, our loan officer apparently has been sharing our information with a relative of mine who’s also a loan officer for the same company in a different state.. we did not authorize anyone to know anything about our loan, and we’re very upset that this has been going on without our permission or knowledge. Is there anything we can do on our end legally?
Ugh, Cheri. I’m sorry to hear that. I’m not an attorney and cannot provide legal advise. You would need to reach out to an attorney to see what your options are.
Hello,
I feel like my loan originator is trying to force me to work with a certain realtor. He actually sent my info to an agent that he assumed was my realtor. When I asked him if so could use any realtor that I wanted, he acted as if it was an issue. Is it standard practice for the originator not to send the prequalification letter to the applicant?
Hi Sasha, I typically send the prequalification letter to the applicant. If I know a realtor and buyer are working together and that the buyer wants me to, then I may include both parties.
Possibly, Bob. When I write a preapproval letter, it’s addressed to my client and includes their home address. Plus, most realtors want to see your photo ID and have your address before showing homes as a safety precaution.
So we had realtor and she just wasn’t for us. So we decided to go with another realtor. We find the perfect house and as we do the appraisal it didn’t appraise for asking price. So the seller refused to sell it. Well our ex realtor texted my husband and I to congratulate us on the new townhouse. Keep in mind the evening we found out that we lost the townhouse that realtor texted the message because she was bitter. Her daughter works at our lenders office. So her daughter told her our personal information about what had happened. So I need to know what i can do legally.
Hello, I have a couple questions. 1) Can my loan officer give my personal information the the seller’s agent without my permission? For example they knew about starting a new job, the pay of the new job, that I owed on taxes and how much I owed on taxed. 2) If not how do I go about getting the information to reprimand the loan officer?
Hi Tabatha, I will not share my client’s detailed private information to the listing or selling agent without my clients express permission.
This can be tricky when you’re dealing with a preapproval situation and the seller’s agent (aka listing agent) is trying to determine how qualified a buyer is. Sometimes they ask very specific questions and without having my client’s (the buyers) permission, I’m not able to answer. I always ask my buyers upfront if I have permission and what details can I share. Often times, a listing agent likes to know credit scores, employment info, are the funds for closing verified, etc. Without the buyers permission, I will let agents know that employment, funds for closing and/or credit have been verified and how far in the underwriting process we are. In a competitive environment, it can really help to have the buyers permission to share more information to help present a stronger offer. I’m not sure what stage your transaction is in but based on your question, it sounds like you did not provide permission.
Have you discussed this with the loan officer? You may want to start there and reach out to their manager. Depending on what type of institution they work for (bank, lender, broker, or credit union, etc.)-they have different regulators. You can check out the loan officer’s history at NMLS Consumer Access. This can also help you determine how they are regulated. Good luck!
I am a first time home buyer. The broker was referred to us by a family member. From the start, he knew we were first time home buyers and we were upfront and honest about everything. Because we has a previous chap. 7 bankruptcy, our only options for a loan were FHA with Wheda. We were denied wheda due to having multiple jobs during covid. We has not found out about the denial until a day AFTER financing needed to be done for underwriting. We were then told we needed a cosigner but ultimately were then told that we don’t qualify for ANY loan. Before we were denied with wheda and got another option to purchase the home, the sellers had threatened us with FRAUD because out broker gave all our information to the other realtor AND the sellers. We were upfront about EVERYTHING! We ended up not getting the house after we were able to gather information and again we needed to be given permission from a manager committee for fraud? I don’t feel like our broker was honest with us and gave away information WITHOUT out knowledge and it ended up coming back negatively towards us no matter what we did.
Sara,
I’m so sorry this happened to you. The broker should not have provided your private information to anyone without your consent. Have you tried contacting their supervisor?
Hi – similar question / experience. I got pre-qualified at the beginning of a home search. The broker asked if he could disclose that with the realtor who referred me to him. I said yes, even though we had not signed a representation agreement as of yet. That evening the realtor called me to say she had a house I might be interested in. I made an offer but it was not accepted before the deadline. My realtor wanted me to extend the date and I was on the fence. At that point she berated me for wasting her time because she knew I had money in my investment accounts. She then rattled off the balances. I was shocked and felt threatened by her. I told her I had not authorized the broker to disclose that information and she told me that I had for the “proof of funds” letter when I made my initial offer. I was never informed of any such document being supplied to the seller. It is my understanding that a proof of funds letter would not include my investment account information – is that correct? If so, would that be an ethical violation for him to disclose that information? Or can he say I verbally agreed to it when I approved the release of the pre-approval letter?
Hi Julie,
Did the mortgage broker ask if they could specifically share your financial information with the real estate agent?
If you’re making a cash offer, it’s typical to provide “proof of funds” to the seller/listing agent (this would be via your real estate agent when the offer is submitted or accepted).
When I’m working with a client/buyer, it’s not unusual for me to be asked to contact the listing agent so that I can assure them that our buyer is strong, which includes confirming that the funds for closing have been verified. Without express permission from my buyer, I cannot tell the buyers agent or listing agent that they have XYZ bank account with $$$ funds.
In my opinion (and I’m not an attorney, I am mortgage advisor), agreeing to become preapproved or to release a preapproval letter to a realtor does not mean that they can also release the details of your private information.
Part two if this original post addresses the ethics portion of your question.
No, the broker did not ask if he could share my financial details – he asked me if he could share the pre-approval letter. This was not a cash sale. When the realtor rattled off those balances and account locations, it was to pressure me to continue with the sale after the original offer expired and she was trying to get me to ‘sweeten the deal’ with a resubmitted offer. I refused to increase my offer price but agreed to extend the expiration date. I had no contact with the broker between the time I saw the house and the day after the offer was accepted. There is nothing in any communications with the agent or broker that mentions sharing my information the day after when I sent him an email stating he was not to be sharing my info with the broker. He agreed but continued to communicate solely with the agent about my closing costs and directions on which account to pull the down payment out of. It was at this point I told her she was to stay out of my finances and she defensively told me that I had authorized him involving her and mentioned the proof of funds letter. I had to look up what that was and according to my research, it would not include investment account information, only liquid/savings. When I reached out to the broker, he told me he was not required to provide the closing statements or directions to me directly. Did I over-react or is this how things are done?
Hi Julie,
It’s not how I would treat my clients.
A loan officer shared my personal information with the listing agent. I’m not getting my loan through her. The listing agent then called my agent & mortgage broker flipping out & trying cancel deal. I’ve been separated for 6 years. Listing agent claims I haven’t talked to my wife in 12 years & she will not sign a waiver.
I haven’t even known my wife for 12 years. We married in 2015. Our son was born in 2014.
Do I have any legal recourse ?
The loan officer & listing agent are close friends.
Hi Noah,
Ugh! There are several privacy laws that lenders must abide by. I’m not an attorney and not sure what your legal recourse may be.
Hi Rhonda,
We were pre-approved since day 1 after providing all of the documents the lender needed, so we put an offer then did the inspections & paid earnest money..
Now on closing the lender states the underwriter denied us..
So now we have to terminate the contract.
The sellers agent wants to keep our earnest money saying we did not sign/provide documents on time.. we did Not give permission for anyone to dig into our mortgage situation.
What can we do?
Hi Q,
Your purchase and sales agreement should have a time line of contingencies that need to be met, including the financing contingency. It should also detail what happens to the earnest money at specific times. Both your agent and your lender would be aware of these dates that need to be met by the contract.
I’m wondering how pre-approved you actually were if the underwriter denied you. Why did the underwriter deny you? Did something change between your preapproval and during the real estate transaction? Was your preapproval from the loan officer or did an underwriter review your pre-application prior to your offer? I’m curious what your preapproval letter looks like. How specific it is with the language as far as being approved.
Bottom line, I would get a second opinion from another lender if your current lender is denying the loan at this stage without offering other options.
I would check the documents that you signed because in order to process your loan to this point, the lender would need you to provide information to proceed.
Some purchase and sales agreements also allow the sellers agents to be informed of certain aspects of the loan with regards to when/if you’re approved.
Bottom line, I cannot provide legal advice as I’m not an attorney.
I am in escrow and the only contingency I have left is my loan contingency. My loan officer was trying to lock in a rate that I was not comfortable with yet. When talking about closing costs and where I could save she said she’d need something concrete from another loan officer saying they could do better so she could go to her boss and have something to work with to lower our closing costs. I told her ok. She immediately called the listing agent without me knowing and told them I was shopping for lenders. The listing agent flipped out and left a nasty voicemail with my agent. I told my agent the conversation I had and she said she’s never heard of a loan officer calling a listing agent to tell them that. She called back the listing agent and assured her I am not shopping I was just doing what the loan officer told me to do. Now I am pissed off at my loan officer and quite frankly don’t want to give her my business. Is this normal for loan officers to do?!?
Hi Rachel, I’m so sorry about what you’re experiencing. I don’t think this is “normal” behavior. I would never do this to a client – ask them to call around to other lenders for a lower quote OR go to the LISTING AGENT to say that you’re shopping. I don’t blame you for being upset with your loan officer. Have you asked your loan officer why they contacted the listing agent?