What to expect from a Mortgage Broker and Fees
Consulting a mortgage agent or broker to obtain a commitment from a lender can be very nerve wracking and potentially expensive nightmare for an in-experienced borrower. Its unfortunate that we have to deal with this and personally my E&O insurance premium would be a lot cheaper if it weren’t for people like this in the business. So I would like to warn people of some of the tactics they use to gouge borrowers of exorbitant fees. You should expect the mortgage agent to tell you up front how long it will take to obtain a commitment within reason. A reasonable amount of time is one week after you have sent them a fully completed mortgage application. You should expect to know in advance how much they are charging you for the loan and how much the lender is going to charge. Banks pay the mortgage broker directly and do not allow them to charge a fee. If your lender is a private lender then the broker can charge whatever they want that you’re willing to pay. Find out up front. Ask them before you sign a commitment.
Watch out for these Unethical Greedy Mortgage Agent Red Flags
DELAYING FEE DISCLOSURE: One of the most common tactics they use is they don’t tell you up front what their fees will be to get you a mortgage. If they co-broke the deal to another broker, they should have a referral agreement with that co-broker upfront and it should spell out exactly who represents the borrower and lender BEFORE the deal is submitted to the lender. The fees should be dealt with in the co-broker agreement and declare exactly how much the total broker fees will be. And that should be disclosed to the borrower first and agreed upon FIRST before signing the co broker agreement. AND HERE’S THE PROBLEM, they don’t do that, they send in the deal and if its co-broked they don’t bother with a referral agreement. The deal gets submitted to a lender and when an approval has been obtained they announce a ghastly huge fee. Well this is totally unacceptable, even for the co-broker representing the lender. I always get the co-broker to sign this document first. And I ask them to confirm with their client if the fees are acceptable, as well as the rate I think will be in the commitment.
Sometimes they only disclose the fees to the borrower in the “Disclosure to Borrower” documents when the deal is at the lawyers office and the borrower doesn’t have time to scramble and raise the money so they end up getting less money from the net advance of the mortgage.
BLAMING THE BORROWERS FOR NOT OBTAINING A COMMITMENT: These agents will placate the borrower with excuses for not getting an approval for weeks or months by telling the borrower that “they are not a strong enough applicant, so its taking longer”. The truth is, if you are not a strong applicant it doesn’t matter. If the agent really knows what they are doing, they should be able to tell you within one hour of working on your stuff or even just talking to you if you will qualify or not. And if you do qualify, they can approve you on the spot and obtain a commitment within days. So be very careful of agents working for weeks and months and not able to provide you with a commitment.
DO YOURSELF A FAVOUR AND CHECK OUT THEIR LICENSE WITH FSCO: You can go to the Financial Services Commission website and enter the agents last name and find out if they are licensed and the rank of their license, here is the link. http://www5.fsco.gov.on.ca/mbsweblist/agents.aspx
They’re are three levels of mortgage professionals. 1. Mortgage Agent 2. Mortgage Broker 3. Principal Broker.
The mortgage agent is the most junior and entry level. The Mortgage Broker has field experience and has been recommended by a Principal Broker for the designation. The Principal Broker is the highest designation and usually owns the brokerage and is most experienced.
If they lie about the rank of the license then they can lie about anything. Another layer of protection is to ask for the brokerage’s policy and procedures manual to make sure you’re being dealt with fairly. Because it may not say it directly in the Mortgage Brokers Act but it does refer to these manuals. And in those manuals are “Duty of Care”, “Ethical Duties”. So you can really find out how ethical they are by simply doing these two things. If they freak out or don’t want to give you that information…..R U N A W A Y!!!