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How brokers can help home owners slapped with mortgage penalties

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Ephraim Vecina | 27 Jul 2016, 08:15 AM Agree 0
Brokers are uniquely placed to enlighten consumers on how penalty is calculated, as well as to assist borrowers in getting the best results
  • Chris | 27 Jul 2016, 10:48 AM Agree 0
    In speaking with my bank in renewing mortgage, this was one item to consider when choosing. The representative at BMO skirted the issue when I asked, what would penalty amount to if I chose the 5 year locked in term rather that the variable and I paid it out early. She said she could not since I did not have the locked in mortgage. Frankly, I felt that was an unethical approach to working with a client who is asking legitimate questions regarding penalties etc.. believe that it is the Banks or the brokers responsibility to inform their client of all costs.
  • David O'Gorman | 27 Jul 2016, 11:37 AM Agree 0
    There is currently a class action lawsuit against one of the big banks because of the inconsistent way they were calculating the Interest Differential Penalty ( IRD), so calling the bank may or may not work.
    In Ontario real estate brokers/ reps have a duty to discover "material facts" & prepayment penalties are "material".
    Had a former student call me in tears. There was a $9,000 prepayment penalty, that was discovered after the transaction was firm & prior to closing. Rep had not had a mortgage verification done, & didn't tell the client, in writing,the importance of knowing the balance owing & the penalty.Lawyer threatened to sue rep for the penalty....Penalty $9,000. Commission $8,000. Rep paid E&O deductible $2500. Insurance company took the hit for the balance.
    Get your client to complete a " mortgage verification" ( standard OREA form) & have them take it to their lender. Follow up with an email, to ensure it is done & giving them a time frame to have it completed, stressing the importance of info. If they won't cooperate in having the form completed, CYA by sending the same email. You told hem to get the numbers in writing, they didn't, not your liability.
    Don't forget to do this on 2nd mortgages & lines of credit too! From a purely selfish perspective you should always do a mortgage verification to see if a) there is sufficient equity in the deal to close b) there is sufficient equity to pay your commission!
  • Najib Shams | 27 Jul 2016, 12:04 PM Agree 0
    Awesome! I always ask my clients to do a Mortgage verification form. They do appreciate my honesty that is my duty toward the client unfortunately, some would not buy it and thinks it is their confidential information and they like to keep it confidential. It is simply because not all realtors request their clients to fill out one.
  • Judy | 27 Jul 2016, 05:04 PM Agree 0
    Interest differentials on prepayment ........... I have never seen a lender give the client the difference when the mortgage rates have gone up and money given to a new borrower - now, wouldn't that be fair??!!!
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