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Broker Agreement

  • Broker Agreement

BROKER AGREEMENT

This Broker Agreement (“Agreement”) is made and entered into by and between [Lender Name] (“Lender”) and [Broker Name] (“Broker”), collectively referred to as the “Party” or “Parties.”

1. Scope of Relationship

Lender is engaged in the business of originating, processing, funding, closing, and servicing loans secured by real estate. Broker, as a mortgage loan broker, seeks to submit loan applications to Lender from time to time for potential funding consideration. The Parties agree to establish a non-exclusive relationship, whereby Broker submits loan packages (“Loan” or “Loans”) on behalf of its clients (“Borrower” or “Borrowers”) for potential financing by Lender.

In consideration of the mutual covenants and conditions set forth herein, the Parties agree as follows:

2. Loan Submission and Approval

  • Broker’s Responsibilities: Broker agrees to submit loan applications to Lender that are complete, accurate, and compliant with all applicable laws and regulations. Broker shall conduct reasonable due diligence to verify the borrower’s information before submission.
  • Lender’s Discretion: Lender retains sole and absolute discretion to approve or deny any loan application. Broker shall not represent to any party that a loan has been approved until written confirmation is provided by Lender.
  • Loan Closing: All Loans shall close in Lender’s name. Lender is under no obligation to accept a minimum number or percentage of loans from Broker.
  • Regulatory Compliance: Broker must ensure that all Loans comply with federal, state, and local laws, including but not limited to:
    • The Truth in Lending Act (TILA)
    • The Real Estate Settlement Procedures Act (RESPA)
    • The Dodd-Frank Act and anti-predatory lending rules

Lender reserves the right to decline any loan application it deems predatory, fraudulent, or lacking a reasonable benefit to the Borrower.

3. Independent Contractor Status

  • This Agreement does not create a partnership, joint venture, agency, or employment relationship between the Parties.
  • Broker shall act as an independent contractor, representing the Borrower and not Lender.
  • Broker shall not advertise, market, or use Lender’s name or logo without prior written consent.
  • Broker shall not imply that its office is an affiliate, branch, or authorized agent of Lender, nor shall it have the authority to bind Lender in any manner.

4. Broker Compensation

  • Compensation Structure: Broker shall receive compensation only for Loans that successfully fund and close. No fees shall be due for Loans that do not close.
  • Market Value Compliance: Broker’s compensation must reflect market value for actual, non-duplicative services, including but not limited to:
    • Borrower counseling
    • Loan application preparation
    • Submission of required documents
  • Accuracy & Compliance: If Lender determines that information submitted by Broker was inaccurate or not provided in good faith under RESPA guidelines, Lender reserves the right to reject the loan submission.

5. Compensation Adjustments & Fee Pass-Through

5.1 Agreed Compensation & Adjustments

  • Compensation shall be based on the agreed-upon points outlined in the Loan Terms Sheet or any applicable agreement.
  • Broker compensation shall be designated as either borrower-paid or lender-paid and must comply with applicable regulations.

5.2 Adjustment Terms

  • Broker Consent Requirement: Lender may not unilaterally reduce Broker compensation unless explicitly agreed upon in writing.
  • Predefined Adjustment Limits: Lender may adjust points within a ±0.50% range of the originally agreed points without additional Broker approval, only in cases where:
    • Borrower requests loan modifications
    • Underwriting conditions require pricing adjustments
    • Market changes impact loan feasibility
  • Minimum Compensation Guarantee: Broker shall receive no less than 1.00% of the originally agreed-upon compensation unless waived in writing.

5.3 Fee Pass-Through Clause

  • If Lender imposes additional fees or pricing adjustments that affect Broker’s compensation, Broker may pass such fees through to Borrower, provided this is legally permissible and properly disclosed.

5.4 Notification & Disclosure

  • Any modification to Broker compensation or loan pricing shall be disclosed in writing at least 5 business days prior to loan closing.
  • All changes must comply with federal and state regulations, including TILA and RESPA.

6. Dispute Resolution

6.1 Good Faith Negotiation

  • If a dispute arises regarding compensation adjustments, loan terms, or other provisions, both Parties agree to engage in good faith negotiations.
  • The disputing Party must provide written notice outlining the nature of the dispute and a proposed resolution.

6.2 Mediation

  • If a resolution is not reached within 7 business days, the Parties agree to mediation before arbitration or litigation.
  • Mediation shall be conducted by a mutually agreed-upon neutral mediator within 15 business days.
  • Mediation costs shall be shared equally between the Parties unless otherwise agreed in writing.

6.3 Arbitration

  • If mediation does not resolve the dispute within 30 days, either Party may submit the matter to binding arbitration under the rules of the American Arbitration Association (AAA).
  • Arbitration shall take place in New York, NY, unless otherwise agreed.
  • If the claim exceeds $500,000, a panel of three (3) arbitrators shall be appointed.
  • Final Decision: The arbitrator’s decision shall be final and binding.

6.4 Exceptions to Arbitration

Either Party may seek legal action in court for:

  • Injunctive or equitable relief, including confidentiality enforcement.
  • Claims of fraud, misrepresentation, or willful misconduct.
  • Broker compensation disputes exceeding $250,000.

6.5 Legal Fees & Costs

  • Each Party shall bear its own legal costs unless the arbitrator determines bad faith, in which case the prevailing Party may recover reasonable attorneys’ fees.

6.6 Governing Law & Venue

  • This Agreement shall be governed by the laws of the State of New York, without regard to conflict-of-law principles.
  • Any legal action must be filed within two (2) years from the date the claim arose.

7. Confidentiality & Data Protection

  • The Parties agree to maintain confidentiality of borrower data and loan transaction information.
  • All data handling must comply with applicable privacy laws, including:
    • The Gramm-Leach-Bliley Act (GLBA)
    • The California Consumer Privacy Act (CCPA) (if applicable)
    • Any other relevant state or federal regulations

8. Acknowledgment & Consent

By checking this box, I acknowledge that I have read, understood, and agree to the terms and conditions of this Agreement.*

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