A leading Ontario veteran is calling on the provincial regulator to level a very lopsided playing field by allowing brokers to charge upfront fees on deals falling short of the current $300,000 threshold.
“What we have now are big-market-centric regs where brokers in smaller, lower-priced markets are not allowed to charge fees up front on deals that might be difficult and very time consuming because the mortgage has to be for more than $300,000,” said Glenn May Anderson, a veteran mortgage broker and now director of franchise development for Dominion Lending Centres. “In big markets where mortgage amounts are higher, that’s not a problem, but in smaller markets with lower average prices that prohibits brokers from being able to do what their counterparts elsewhere can.”
May-Anderson’s comments come as the provincial regulator FSCO readies for its review of mortgage broker regulations ushered in five years ago. A large part of that process is soliciting brokers for their take on what can and, in fact, should be done to improve those rules.
Under the current Act, collecting advance fees for mortgages if the principal amount of the mortgage is $300,000 or less is prohited and “the Mortgage Brokerage cannot require or accept an advance payment/deposit for services to be rendered.”
While charging fees is all but unheard of for standard A deals, brokers are expected to increase their use as tighter guidelines force a growing number of borrowers into the alternative lending space.
Advance fees could prove to be an especially useful tool for mortgage professionals in small town Ontario now pouring hours of work into complex Alt A deals with only a small finder’s fee waiting for them at the end of a lengthy process.
Allowing them to collect advance fees would also better position mortgage brokers as financial service professionals, suggested May-Anderson, open to lowering the $300K threshold or doing away with it altogether.
“We create a lot of value,” he told MortgageBrokerNews.ca. “The definition of a professional is someone you have to pay even if you don’t take their advice.”