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CHLA Asks CFPB to Protect Consumers from Harmful “Dual Compensation” Arrangements in Homebuying Process

Media Contact: Lilly Freemyer

The Community Home Lenders of America (CHLA) today sent a letter to the Consumer Financial Protection Bureau, asking the agency to adopt basic rules to protect homebuyers from situations where one individual may control both the brokerage and mortgage origination functions. Such control by one individual in a home purchase transaction could lead to conflicts that harm the financial interests of the consumer.

Currently, FHA, Fannie Mae, and Freddie Mac allow situations where an individual is being
compensated both for participating in the real estate broker transaction, representing the buyer and/or seller, and as the underlying loan originator. 

Link to letter:

“We believe it is appropriate for the Bureau to establish a uniform disclosure requirement clearly identifying the dual compensation and making it clear that the buyer of the home is under no obligation to use the mortgage services of the loan originator engaging in dual compensation,” the CHLA letter states.

This CHLA letter also requests that the Bureau take action to impose the following two important consumer protection conditions on the use of dual compensation:

(1)  No mortgage loan originator should be allowed to receive dual compensation in conjunction with a mortgage loan unless that individual is licensed pursuant to SAFE Act requirements – ie., the loan originator has: (a) completed 20 hours of pre-licensing SAFE Act courses, (b) passed the SAFE Act test, (c) passed an independent background check, and (d) completes 8 hours of annual SAFE Act continuing education courses.

(2)  No loan originator should be allowed to receive dual compensation in conjunction with any mortgage loan if that loan originator is also simultaneously representing the seller (individually) in a real estate transaction.

The letter renews the longstanding CHLA call for all loan officers, including those employed at banks, to adhere with SAFE Act licensing requirements. 

The letter also details how potential conflicts could harm the homebuying consumer. Knowledge (by the same person acting as agent and loan originator) of the maximum amount a borrower qualifies for their mortgage loan would provide an unfair advantage to the seller regarding whether to accept an offer from a potential buyer, or counter with a higher amount.


Another example: a dual compensation situation could create a conflict of interest for a real estate broker advising a seller on which offer to accept, when one of the offers would result in mortgage compensation to the same individual.