Mortgage Broker Referral Fee Agreement Template for England and Wales
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What is a Mortgage Broker Referral Fee Agreement?
A mortgage broker referral fee agreement governs the payment made to a third party, such as an estate agent or conveyancer, for introducing mortgage clients to a broker. In England and Wales, the arrangement must comply with FCA MCOB disclosure rules and, where applicable, the Estate Agents Act 1979. The agreement should clearly set out the fee, trigger event, clawback conditions, and data-sharing obligations.
Frequently Asked Questions
What must be disclosed in a mortgage broker referral fee agreement?
The agreement must state the fee amount or calculation method, when payment is triggered (on application, offer, or completion), any clawback conditions if the mortgage does not complete, and the obligation on the broker to disclose the referral to the client under MCOB 2.3. Undisclosed referral fees are an FCA compliance breach.
Who can legally pay a referral fee to a mortgage broker?
Any business that refers clients to a mortgage broker may pay a referral fee, including estate agents, conveyancers, accountants, and independent financial advisers. However, if the referrer is a regulated firm, the payment must comply with their own FCA rules. Estate agents must also comply with the Estate Agents Act 1979 disclosure requirements.
Can a referral fee be a percentage of the broker's commission?
Yes. Referral fees are often structured as a fixed amount per completed case or a share of the procuration fee received from the lender. Both structures are permitted, provided the total remuneration chain is disclosed to the client and the broker can still demonstrate the advice given was suitable and in the client's interest.
Are referral fees between conveyancers and mortgage brokers lawful?
They are lawful provided they are disclosed to the client and do not influence the independence of the advice given. The Solicitors Regulation Authority requires solicitors to disclose any referral fees and satisfy themselves the arrangement does not compromise their duty of independence. Undisclosed payments may constitute a conduct breach.
What clawback provisions are typically included?
Most agreements require the broker to repay all or part of the referral fee if the mortgage does not complete, if the client redeems within a specified period (often two to three years), or if the lender claws back the procuration fee. Clawback tiers linked to the repayment date are common and should be clearly drafted.
How should client data be transferred between the referrer and the broker?
The referral agreement should include a data sharing schedule confirming that the client has consented to their data being passed to the broker, identifying the lawful basis under UK GDPR, and specifying what data may be shared. Using a blanket referral form without explicit consent exposes both parties to ICO enforcement action.
What happens if a referred client complains about the mortgage advice?
The broker, as the FCA-authorised adviser, bears primary responsibility for any advice complaint. If the client can show the referral arrangement influenced the advice given, this may aggravate the FCA's findings. The referrer's liability is generally limited to data protection or misrepresentation claims unless they hold their own regulatory permissions.
How long should records of referral fee payments be kept?
FCA MCOB requires mortgage intermediaries to retain records of all remuneration, including referral fees received, for at least three years after the transaction completes. Where the mortgage is linked to a pension or investment product, the retention period extends to five years. Both the payer and recipient should retain their own records.
About the Mortgage Broker Referral Fee Agreement
A Mortgage Broker Referral Fee Agreement is a crucial legal document that governs the relationship between mortgage brokers when one refers clients to another. This agreement ensures that your referral arrangements comply with strict federal and state regulations while protecting your business from potential legal issues. The document establishes clear terms for compensation, services, and regulatory compliance requirements that are essential in today's heavily regulated mortgage industry.
When do you need this document?
You need this agreement whenever you're establishing a formal referral relationship with another mortgage broker or lender. This includes situations where you're referring clients to specialists in different loan types, geographic areas, or when you're unable to serve a particular client's needs. The document is also essential when participating in referral networks, establishing correspondent lending relationships, or when state licensing requirements mandate formal agreements between brokers. Additionally, you'll need this agreement to document compliance with RESPA requirements and to protect against allegations of illegal kickbacks or fee-splitting arrangements.
Key legal considerations
The most critical aspect of any mortgage broker referral agreement is compliance with RESPA Section 8, which prohibits kickbacks and unearned fees in real estate transactions. Your agreement must clearly demonstrate that any referral fees are payment for legitimate services actually performed, not merely compensation for referring business. The fee structure must be reasonable and commensurate with the value of services provided. You must also ensure proper disclosure requirements are met under TILA and CFPB Regulation X. The agreement should include specific language about licensing compliance, as both parties must maintain appropriate state licenses. Additionally, consider including indemnification clauses to protect against regulatory violations by the other party, and ensure that all fee arrangements are transparent and properly documented for regulatory scrutiny.
Legal requirements in United States
Under United States federal law, your referral agreement must comply with multiple regulatory frameworks. RESPA Section 8 requires that referral fees represent payment for goods, facilities, or services actually furnished or performed, and prohibits fee-splitting arrangements that don't meet these criteria. The SAFE Act mandates that all parties maintain proper licensing as mortgage loan originators where required. State licensing laws vary significantly, so your agreement must address specific requirements in each state where you operate. Many states require written agreements for referral relationships and mandate specific disclosure language. CFPB regulations under Regulation X impose additional compliance requirements, including proper record-keeping and disclosure obligations. Your agreement must also address TILA disclosure requirements, ensuring that all fees and costs are properly disclosed to borrowers. Finally, state real estate commission regulations may impose additional requirements on the structure and documentation of referral relationships, making jurisdiction-specific compliance essential for enforceability.
GOVERNING LAW
Applicable law
This Mortgage Broker Referral Fee Agreement is drafted to comply with England and Wales law. Key legislation includes:
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