An Ottawa broker has come up against what he calls the most overt attempt to shut mortgage professionals out of the condo development market -- a builder’s email specifically demanding a commitment letter from a big bank and “NOT from a mortgage broker.”
“I fully believe this is an example of tied selling,” said Stephane Prevost, an agent with Dominion Lending Centres Alliance. “Here, my client, the buyer, is being told, in writing, first, that they must produce a commitment letter with an 18-month rate hold – something brokers can’t really furnish – and, second, that the letter has to come from one of the Schedule 1 banks and not from a broker.”
Prevost has now taken that complaint to the competition bureau, which has suggested the builder’s demand is within the law, based on past precedence.
The conflict stems from an email sent to Prevost’s client late last month, with the developer laying out requirements to cement a purchase agreement.
“For the mortgage pre-approval letter, as mentioned during the contract signing, it must contain the following four pieces of information in order to be accepted,” writes the real estate agent for the developer. “1. The approval must be from a Canadian Schedule 1 Bank (NOT from a mortgage broker). 2. The approval must be valid until closing – November 2013 to be determined.”
Brokers rarely encounter that first demand in writing, said Prevost, concerned it represents a new level of aggressive competition between banks and brokers for clients buying “off the plan.”
While banks routinely enter into formal relationships with developers granting them access to prospective buyers looking for rate holds, brokers have traditionally been shut out of the market at that point. They instead seek to convert the client closer to construction completion. It’s a way of getting around their limited access to extended rate holds.
That might be the status quo, but it’s largely been one relegated to back room and not put to paper.
“These people are basically not allowing mortgage broker s access to the client until after the agreement to purchase has been signed and accepted,” a frustrated Prevost told MortgageBrokerNews.ca “ It’s what goes on all the time verbally, but on not in writing. And If you look at the document, it is almost as though they are telling the buyer that this is a legal requirement – not to use a mortgage broker and to have a 18-month rate hold. It’s not.”