Broker: Extra fees giving lenders and brokers a ‘bad name’

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A mortgagebrokerNews.ca investigation has identified at least one recent case where the client of a Toronto broker was charged an extra $100 “monoline surcharge” by their lawyer. The added expense was tabbed onto to a bill for closing costs and specifically meant to compensate the lawyer for a protracted and confused closing process.

That kind of extra billing isn’t just happening in Toronto.

Kent Farnsworth, an Atlantic-based broker with Mortgage Alliance Simply Mortgages has had to assemble a stable of lawyers he knows charge the same regardless of lender type, after numerous frustrating instances of extra fees.

“I try to take control of who the solicitor is; there are several lawyer that are fine with dealing with monolines but there are some that charge more, which gives brokers and lenders a bad name,” he told MortgageBrokerNew.ca. “It happens pretty frequently.”

It’s a trend MortgageBrokerNews.ca originally reported on last year, when an Alberta-based broker called for lenders to better streamline their documentation process.

“I’ve been hearing from lawyers’ offices that they are having difficulty with some of the instructions that are being sent by non-bank lenders in Edmonton and some other areas in Alberta,” Connie Graham of Axiom Mortgage said at the time. “Many of the lawyers are actually starting to charge clients an additional fee if the mortgage instructions are from a non-bank lender because it makes more work for them at closing.”

According to Graham, the length of the instructions are sometimes seven times as long as a bank’s instructions. They also often lack specific funder contact information, forcing lawyers, in some cases, to call a 1-800 number and wait on hold before reaching someone who may or may not have the answer.

And that process is increasingly bogged down by monolines who outsource the paperwork, which adds another step in the origination process, argue some brokers.
 
 
 
  • Jesse D on 2015-08-20 9:47:48 AM

    For some reason their are lawyers who do not like non-bank lenders...I've been told due to instructions, pressure to close quick, not knowing the lender well enough and not only will they charge more, they also try to convince client to go elsewhere without knowing the file. I did an $80k heloc for a client, their downtown Whitby lawyer agreed to do the deal matching FCT at $619. WHen client signed, the legal bill was $2280. Client lost their &^%#, luckily that lawyer was their choice. I usually recommend certain lawyers due to cost, convenience, etc. but if clients insist, not much we can really do without risking conflict. Perhaps the mono-lines could try to work better with the lawyers so they do not take it upon themselves to influence clients to do what the lawyer wants. If only, we could bypass lawyers all together and just use firms like FCT or Anderson Sinclair's My Closing.

  • Arbitrage on 2015-08-20 9:55:22 AM

    This has become very frustrating in my city as well. There is one lawyer in town that immediately sends her clients over to a bank rep when she sees a monoline cross her desk. She trashes the lender (and indirectly the broker) and has a bank rep that can put the deal together quickly. Together they essentially snipe your deal in the 11th hour.

    Obviously we all avoid her like the plague but to be honest, part of me doesn't blame her. I see first hand the cartwheels that the lawyers have to do for some of our monolines. It seems FCT closings are smooth with some lenders and BRUTAL with others. It would be nice if together they realized just how damaging a stressful closing can be to both client and broker alike and took some steps to improve their process.

    I have definitely shifted my flow of business away from certain lenders for this reason and occasionally when I find myself doing a deal with them I color code it in red and am forced to babysit the closing from 4 days out right up until 5pm on the day of closing sometimes...ugh.

  • Glen K on 2015-08-20 10:20:26 AM

    In Vancouver there are a number of lawyers who will charge extra. However, I have found recently that Bell and Cobbett do not charge extra for mono line mortgages and I am not sending much business to Tony these days because his office charges exrta for monoline mortgages. FCT needs to have a broker portal so that we can check in and see if there are any outstanding conditions. Unfortunately there is some extra paper work for lawyers when it is an FCT managed process.

  • Dustan Woodhouse on 2015-08-20 10:39:21 AM

    Brokers who know all aspects of their business should not ever worry about 'looking bad' over this.

    The choice to use a monoline is one that has upside and downside and the key is knowing how to mitigate accordingly.

    i.e. have a relationship with specific lawyers offices and maintain control over the client experience.

    The differences in the process can be staggering, measured in hours or time for conveyance staff.

    It is a hot topic in any Real Estate conveyance office.

  • Daryl French on 2015-08-20 12:01:13 PM

    Last year we had our agents sit in on the lawyer appointments with clients and were shocked by some of the requirements the lawyers had to handle, many of which had already been handled by our agents.

    We raised this with Street Capital last fall and have seen little to no change and feel this is unfair to our clients and don't blame lawyers for adding a surcharge as they have to spent a lot more time and give opinions on things like if the condo unit has experienced water damage.

    Many of the requirements are things that should be confirmed prior to subject removal not at closing.

    Monolines need to address this but claim they are not hearing it's a big issue, so it's great to see this article and I hope agents speak up.

  • Mark Morris, Axess Law on 2015-08-20 12:33:43 PM

    As a lawyer in Toronto I can confirm that many law firms charge additional amounts for Monoline mortgages. In fact, when we explain to our industry colleagues that we do not charge variable fees based on the lender supplying funds they often wonder why given the extra work involved with monoline products, products that, to be clear, involve substantially more work for our clerks.

    Without making this comment sound too much like a business plug for our firm, I cannot add to the article except to say this... Over my 15 years of practice Monoline mortgages have become easier as our firm's competence has improved. Choosing a law firm that understands a lender's expectations in advance greatly reduces the need for further documentation and delays down the road. Monolines present a significant funding challenge when their requirements are not met (unclear ID, PAP form etc). Good law firms check list those items in advance and understand the standards of quality that those same banks expect the documentation to be in when received. If a lawyer is starting out, runs a disorganized practice or is otherwise unfamiliar with the above requirements, delays on these financial advances are an almost inevitable result.

  • Walid Hammami on 2015-08-20 8:53:09 PM

    In Quebec we have the same problem. Notaries for most part hate monolines and denigrate them most of the time. It could be more challenging to deal with a virtual lender then a bank but it might also be that the notary/lawyer in question is not comfortable with certain lenders.

    Regarding the fees I have a n issue with a lender right now and I will keep you posted about it.

  • Bank deals on 2015-08-21 10:04:16 AM

    as a total opposite, deals that are funded through a bank and require client to meet in advance at branch, should have a heavily reduced legal fee. All the work's done at the branch signing. Tony charged full fee to simply witness sigs

  • Jordi on 2015-08-21 10:38:14 AM

    I cannot blame the lawyers. I see cases where the monolines are shifting the resposibility of reviewing and approving the strata documents to the lawyer?

    It is something that needs to be addressed as I have heard from a few clients that they have been told that dealing with the monolines is more difficult and can cost more at closing (I am sure this is the bank in their ear)

    For the time being Dustan is correct in how to battle this issue. Have a good relationship with a lawyer and control the deal from start to finish.

  • Daniela DeTommaso, Vice President, FCT on 2015-08-24 12:20:52 PM

    FCT is very committed to finding ways to enhance the service experience for all parties involved in a real estate transaction. Because FCT is involved as an outsourcer for several monoline lenders, we are very aware of the challenges and opportunities that exist today and we truly appreciate the comments, feedback and suggestions we get regularly from our valued customers; including our Broker customers and their borrowers.

    We know first-hand that our lender customers are very focused on ensuring the best possible experience for all parties involved in mortgage processing. We have already implemented several improvements to our own process to enhance the customer experience and we continue to work very closely with our lenders and lawyer customers to streamline efficiencies and eliminate pain points for the lawyer, the broker and the borrower.

    Our commitment is to continue to engage the real estate community on the issues and find solutions that will work for all parties involved.

  • Cinzia Dalgarno on 2015-08-24 6:59:51 PM

    this extra fee has nothing to do with lawyers "not liking" certain lenders... it has to do with being paid for value given. if a certain lender consistently has additional requirements/causes CONSISTENTLY, on every file, additional work on the lawyers' part, then why in the world WOULDN'T they charge extra for any files where that lender is the mortgagee? they'd be stupid not to.
    As the broker who chose to go to that lender - why aren't you having the conversation with the lawyer? ie, "hi there, just checking on whether you've dealt with SO & SO lender before, do you have any issues working with them? oh, really, you charge an extra $250 cause their mortgages are a disaster/are a LOT of extra work/etc? would you mind if I pay you that fee directly? I don't want my client to have to worry about that extra charge.
    OR... you can educate your client. Assumably, the 'high maintenance' lender is the only lender they qualified for/the best lender for getting them the best product/rate they qualified for.
    thus, have the conversation. look, i have access to all the lenders... but, this is the only lender that was able to approve/etc etc... unfortunately, part of being a lender who can be more flexible/etc means they require a bit more work regarding the legal documentation/etc. you might see an additional fee of $200 or so... etc etc etc.
    ultimately, if you dont want to have the clients charged/nor do you you want to pay the extra cost of using that lender, THEN DONT USE THAT LENDER.
    why expect lawyers to work for free/not charge based on amount of work done?

    when did brokers become so narrow minded?
    Lawyers, like lenders, appraisers, realtors... they are all part of our team.
    stop complaining, find ways to make things work without badmouthing the professionals we rely on to get our deals done.

  • Cinzia Dalgarno on 2015-08-24 7:05:51 PM

    this extra fee has nothing to do with lawyers "not liking" certain lenders... it has to do with being paid for value given. if a certain lender consistently has additional requirements/causes CONSISTENTLY, on every file, additional work on the lawyers' part, then why in the world WOULDN'T they charge extra for any files where that lender is the mortgagee? they'd be stupid not to.
    As the broker who chose to go to that lender - why aren't you having the conversation with the lawyer? ie, "hi there, just checking on whether you've dealt with SO & SO lender before, do you have any issues working with them? oh, really, you charge an extra $250 cause their mortgages are a disaster/are a LOT of extra work/etc? would you mind if I pay you that fee directly? I don't want my client to have to worry about that extra charge.
    OR... you can educate your client. Assumably, the 'high maintenance' lender is the only lender they qualified for/the best lender for getting them the best product/rate they qualified for.
    thus, have the conversation. look, i have access to all the lenders... but, this is the only lender that was able to approve/etc etc... unfortunately, part of being a lender who can be more flexible/etc means they require a bit more work regarding the legal documentation/etc. you might see an additional fee of $200 or so... etc etc etc.
    ultimately, if you dont want to have the clients charged/nor do you you want to pay the extra cost of using that lender, THEN DONT USE THAT LENDER.
    why expect lawyers to work for free/not charge based on amount of work done?

    when did brokers become so narrow minded?
    Lawyers, like lenders, appraisers, realtors... they are all part of our team.
    stop complaining, find ways to make things work without badmouthing the professionals we rely on to get our deals done.

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