Industry’s use of cancellation fees revealed

Industry’s use of cancellation fees revealed

Industry’s use of cancellation fees revealed The results are in, and the number of brokers who charge cancellation fees – touted as the best protection against rate shoppers – may surprise you.

A healthy debate has ensued on MortgageBrokerNews.ca about the use of cancellation fees, with brokers in both camps providing compelling arguments. But a new MortgageBrokerNews.ca survey is quantifying just how widespread is its use.

According to a recent MortgageBrokerNews.ca poll, 77% of brokers refuse to charge cancellation fees.

Of those polled, 12% admitted to using them as a rule, while 11% do in certain cases.

The small percentage of brokers using the tool, touted as the best way to prevent rate shoppers from jumping ship once they have a commitment letter to present to a bank may surprise its advocates.

“My penalty fee is 1%. But before I put it in the contract, I make sure all things are covered and one important thing is the lender's penalty,” Walid Hammami, a Quebec-based broker with Dominion Lending Centres, wrote on MortgageBrokerNews.ca. “That penalty clause saves me a lot of time; I use it to filter out clients.”

The vast majority of broker subscribe to a different thought.

“I understand that the business has changed dramatically and rate shoppers will waste your time. However, these cancellation clauses are not right,” Jim Tourloukis, a broker with Verico Advent Mortgage, wrote on MortgageBrokerNews.ca. “If someone wants to go elsewhere then tough luck to you, mortgage agent.”

Still, most industry players are free to decide whether or not to implement a cancellation fee policy. But at least one major superbroker does not allow its brokers to charge them.

“None of our brokers do it, so it’s really not an issue for us,” Cameron Strong, CEO of Invis Mortgage Intelligence, told MortgageBrokerNews.ca. “We don’t believe in that – if you don’t get the deal done, you don’t get the deal done and you move on to the next. There is so much business that brokers just keep moving; they’re so busy.”
17 Comments
  • Mike 2015-09-28 9:51:13 AM
    Question: In Ontario FSCO does not allow fees to be charged on mortgages under $300,000, so if the mortgage does not fund thru the brokerage can the brokerage legally collect a fee? refer to section 37 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice.
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  • Jim T, Advent Mortgage 2015-09-28 9:53:46 AM
    Nobody in their right mind would sign such a cancellation clause IF in fact they knew what they were signing. I have seen these cancellation clauses from many brokers and in most cases they are not that clear. These brokers are praying on unsuspecting clients and this is wrong. Maybe FSCO should be lobbied to introduce the removal of these clauses altogether. Going forward I am warning anyone who will listen about this practice and to avoid any broker who asks you to sign these clauses. Maybe everyone can do the same.........
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  • John Dunford 2015-09-28 10:07:32 AM
    Try to collect your fee. You have to go to small claims court, and hopefully you win. It takes money and time out of your busy schedule. You create a lot of anger with the client. Remember, good news travels fast, but bad news travels faster. You could loose other potential clients. You are better off to go after more business, where you can make good money and keep a good reputation.
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