Why do lenders deal with mortgage brokers?
You might think that since the mortgage broker finds the borrower, the lender doesn’t have to pay the costs associated with obtaining that borrower, such as advertising and marketing, having branch offices, etc., and therefore dealing with mortgage brokers is more profitable for a lender. While that is certainly the case, it is only true when mortgage brokers meet the following set of basic expectations.
Mortgage brokering in Ontario is regulated by the Financial Services Commission of Ontario (FSCO) and requires a license. To obtain a license you must first pass an accredited course. The Real Estate and Mortgage Institute of Canada Inc. (REMIC) is accredited by FSCO to provide the course. For more information please visit us at www.remic.ca/getlicensed or call us at 877-447-3642.
These expectations can be summarized as:
- Provide borrowers who are suitable for the lender
- Provide appropriate protection against fraud
- Facilitate the transaction to its successful completion (funding).
These three expectations form the cornerstone of the relationship between the lender and the brokerage community. The best way to ensure that these expectations are consistently met is to adopt them as core values or philosophies that are applied to every transaction. To meet these expectations they must first be explained.
1. Providing borrowers that are suitable for the lender
The lender’s first expectation is that the mortgage agent will only send an application on behalf of a borrower that fits the lender’s lending criteria. Lending criteria include such things as income and employment requirements, property requirements, credit requirements and so on. This means that the mortgage agent must know and understand the lender’s lending criteria and be able to accurately assess the borrower to determine if they meet those criteria.
Unfortunately, a typical lender complaint is that some mortgage agents send them applications for products that they do not have. This type of error can erode the confidence that lenders have in the brokerage community.
2. Providing appropriate protection against fraud
Lenders have been suffering from an increase in mortgage fraud over the past several years. Although not technically a mortgage agent’s legal responsibility, it is a mortgage agent’s ethical and moral responsibility to make reasonable attempts to protect the lender from fraud.
In many brokerages’ set of Best Practices it is deemed necessary for the mortgage agent to review all documentation received from the borrower for accuracy and consistency. This means identifying any signs of potential fraud, such as poorly written or typed income verification as well as verifying income and identity.
3. Facilitating the transaction to its successful completion
A lender expects that a mortgage agent has submitted an application to that lender because he or she has determined that lender to be the most appropriate for the borrower. In addition, the lender expects that, if approved, the mortgage transaction will close. That requires the mortgage agent to ensure that the borrower is committed to completing the transaction and understands what is required of him or her to conclude it.
A lender also expects that a mortgage agent will be available to assist in ensuring the transaction closes if there is anything that the mortgage agent is required to accomplish such as meeting outstanding conditions.