Referral power taints real estate loan market

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(This is Part 1 of a three-part series. See Part 2 and Part 3.) Q: What are referral fees? A: Referral fees are payments made by service providers to other parties as quid pro quo for referring customers. For example, a real estate agent is rewarded for sending a borrower to a loan provider. The reward, whatever form it takes, is a referral fee. Referral fees should be distinguished from referral power, which is the ability to direct a client to a specific vendor. Referral power is based on information and authority of the referrer, and ignorance of the client. The real estate broker has information about the reliability of loan providers, and may have authority in the eyes of the borrower. The borrower may be ignorant about loan providers Not everyone with referral power collects a referral fee. For example, I have sent many mortgage borrowers to Upfront Mortgage Brokers but I have never collected referral fees from them. Q: Why are referral fees considered bad? A: One reason is ...