If a home is the biggest purchase clients will ever make, they should at least be given a chance to read the documents they’re asked to sign, says one industry veteran, pegging that interval at 24 hours.
“It’d be nice to get the documents ahead of time – say for 24 hours,” says John Dearin, owner of DLC Mortgages and More, “or even that the major parts of the mortgage were spelled out on a summary sheet, citing best and worst-case scenarios if the client decides to opt out of the mortgage early, penalties, options if interest rates drop. I challenge anyone to admit that they were given the time to review the contracts clause by clause by either the lender or the lawyer.”
The Newfoundland broker says that recent clients have gone to the bank, been presented with the documents and told to sign without getting a chance to read it.
"Most borrowers never get the chance to review the documents put in front of them," he tells MortgageBrokerNews.ca.
For Dearin, the incredible pressure placed on clients to sign mortgage documents in a tight time frame is at the very least, unfair.
“We never get the documents early, and I’m sure this is something that happens right across the country,” he says. “It is simply not an option to take home the documents to look over. It is simply ‘sign here NOW.’ For the client, they are only 24 hours away from getting their home – of course they are always going to sign.”
Dearin’s last experience with a bank prior to becoming a broker was just such a ‘sign here – NOW’ situation.
“My last bank mortgage prior to becoming a broker, I went to the branch and when I started to read the 15 legal-size pages of the contract, the bank rep asked me what I was doing. I told him I was reviewing the contract and he said he didn't have time for this – (that) I could do this at the lawyers.”
Dearin tells MortgageBrokerNews.ca. “At the lawyers, I was told I would be charged $100 an hour to sit in his office and make notes, plus $135 an hour for him to review my questions. On top of what I was already billed. It has not changed, our follow-up with our clients indicate the lawyers do the same now. So the client signs to get his money.”
Dearin would like to see the lender provide a summary sheet to the client, allowing them to look over the salient points of the document – given the tight time frame allowed by the lender to sign the documents.
In his view, the heart of the problem for clients is the fixed-term mortgage.
“People don’t know what they are going to be doing in the next five years,” he points out, citing the down side of fixed-term mortgages. “I can think of only one client who I convinced to switch from a fixed term to a variable mortgage.”
A valuable tool for brokers would be an official document, from perhaps FSCO, showing the numbers of homeowners who have paid penalties by leaving fixed-term mortgages early.
“I know that we have more than 90 per cent of people opting out of their fixed mortgages early, but we need something more official to show the client – to better educate them,” he says. “Something official from one of the oversight regulatory bodies, like FSCO, would carry weight with the client.”