Lenders killing deals with eleventh-hour demands

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A growing number of files are being sent back by lenders with demands for additional information but with too little time to meet closing, argues one industry veteran.

Lenders are sometimes informing brokers of issues with files after it’s too late, according to one industry player who has lost deals as a result.

“I don’t mind if I’m told by the lender two weeks before closing if there is an issue with a file, but they sometimes tell you the day of closing that the application needs something changed,” Ross Taylor of Mortgage Intelligence told MortgageBrokerNews.ca. “In one case they raised an issue at the closing about a problem.”

In one case, Taylor had worked on a client file for two months only to have the deal fall apart at or near closing – something that took all parties by surprise.

According to Taylor, the lender informed him on the day the property was meant to close that the lawyer who had signed off on the deal was on their “do not work with” list.

“It was a refinance deal and I lost a $5,000 commission on a $480,000 mortgage,” he said.

Taylor suspects the fulfillment specialist didn’t read the documents closely enough and only caught it when it was too late.

And although the BDM tried to get an exception to allow the deal to go through, nothing could be done.

It could be a case of high volumes forcing underwriters to spend less time on each file, according to Taylor.

Another reason for the uptick in last-minute requests could be the mortgage rule and underwriting changes that brokers – and lenders – have grappled with over the past few years. They have underwriters crossing their Ts and dotting all there I’s, especially in light of recent broker fraud allegations by a leading monoline.

But losing a deal in the home stretch, for whatever reason, is something players can guard themselves against, argues one broker.

“You have to have a checklist and you have to review your documents before sending them to the lender,” John Panagakos of Dominion Lending Centres Home Financial told MortgageBrokerNews.ca.. “Scrutinize everything because we shoot ourselves in the foot by not reading every single line of a document.”
 
  • Claire Drage on 2015-08-27 9:43:03 AM

    I read and review every single document before it goes to the lender to be pro-active and mitigate any potential concerns they have. BUT in the last few months I have had three files go south with massive scrambling at the last minute - it is frustrating and most recently it appeared that every time someone different looked at the file - or a last minute supervisor reviewed it - they found something of concern. It is frustrating and I try so hard to be polite and professional as we work thru the issues - but how do you explain to your client that their income was fine a month ago when the condition was met but now it isn't and freak them about day before closing! Or a random audit the day before closings requires more documentation! Not sure what the solution is because some of our poor underwriters are torn between a rock (changing guidelines, internal audits, investors changing their minds about what they want to fund) and a hard place (the relationship with the mortgage broker that is jeopardised with the bad news they have to pass on!).

  • KBowles on 2015-08-27 10:13:10 AM

    It is easy to pick out which lenders this article is talking about. I think they need to change their process or give the underwriters the authority to actually satisfy a condition or make it mandatory that an audit be done 1 or 2 weeks prior to close and send us a confirmation that the final review of the file has been complete. This why we have it on our check list to be looking for the final audit and not assuming everything is ok. I have had files complete 2 months prior to close and 2 days before close completely new docs are requested. My solution, limit the amount of deals sent . If closing is a nightmare all the great service given prior is forgotten.

  • John Greenlee on 2015-08-27 10:26:51 AM

    I am wondering if there is more to the story about the loss of the refinance deal due to the lawyer being on the "do not deal with list".

    The payout statement would have been ordered, wouldn't it have made sense to send the deal to another lawyer to have it close a couple of days later?

    Not to detract from the fact that, if the above is true, the deal should never have been instructed to that lawyer in the first place.

  • Steve Clark on 2015-08-27 11:02:55 AM

    I have had a couple of similar closings and they put unbelievable stress on clients, which is totally unfair to them as well as unnecessary. It comes down to human error in most cases.

  • Claire Drage on 2015-08-27 11:34:24 AM

    KBowles - could agree with you more - we are only as good as our last deal and that goes for the lenders as well I am afraid

  • M.Rice on 2015-08-27 11:44:04 AM

    As a Lender putting last minute demands are not good but I must say it is rare that we receive a broker deal with all information up front. We regularly get information trickling in up to funding date. I can see information coming in that wasn't quite the same as on the application can change the original approval. This can all be avoided if information for the deal was sent upfront so the Lender can issue a commitment letter without subjects. I never can understand why brokers hold off so long on information so close to a funding date. They are only shooting themselves in the foot, and impeding their chances for a smooth funding. My message to Brokers, get your supporting documentation in on time!

  • mat on 2015-08-27 12:29:27 PM

    Indeed last minute audits are completely unnecessary. Not sure why it can't be done a week or two before. This just happened to me where even though all docs were in 3 weeks before closing (income docs 2 months!), the day of closing i get an email saying "i can't make the income work...do they have CTB?" Good thing they had kids! then once provided...two hours before closing audit needs birth certificates of kids. My solution is use another lender until management pulls their heads of of somewhere and provide great service from beginning to end. I do feel bad for some of these underwriters though.
    Peace out!

  • Michael Mitchell on 2015-08-27 1:00:35 PM

    This what really pisses me off ,99% of the time I send the complete file in.Being in the bus. for 18 years,you tend to know what will be needed.As Agents/Brokers have to have documentation in 10 days prior to closing,should the underwriters not be required to do the same?

  • Mike on 2015-08-27 1:01:07 PM

    Tyler, why would you not just changed the lawyer? My problem is getting the bank to look at the documents and actually instruct the file, too many deals are getting to the lawyer 2 days before and then still needing branch signing. We do all our work and provide complete files but it seems to fall apart with the lender's lack of being able to handle the volume. I have never had a lender pull my file right before close on documents and if they did it would be the last time I dealt with them.

  • Victor Simone on 2015-08-27 1:48:06 PM

    I don't have the perfect answer for this, and I try to do my best to control a couple of areas.
    1. For "AAA" deals to ensure I have 2 year NOAs prior to submitting to an insured lender. 2. When possible, I try to send all outstanding items into the funder one time, two weeks in advance of closing. It works out 99% of the time, and when things go wrong, it seems both I and the lender are equally to blame for a missed or stressful closing. We're not perfect, and I just try my best to help the clients handle the emotional toll the extra request for documents presents.

  • Suganthan on 2015-08-27 3:58:54 PM

    Refinance can close a day or two latter and the lender won't instruct the deal if the lawyer not on their list... something not right. There is more to the story if it was the case.

  • Dave on 2015-08-27 4:02:22 PM

    Understaffed lenders and admin people that are incompetent...

  • Dan on 2015-08-27 5:24:26 PM

    I agree with John Greenlee, there's more to this story than we're hearing, I wonder what the lender would say?

    Pre-funding is a common part of the business to make sure files are clean (Speaking of crossing t’s and dotting I’s, have you ever seen CMHC's audit requirements?!?). Lenders do not want these reviews to impact their, or your, business and try very hard to make sure it does not. Since this reality is not going to change, take John Panagakos' advice; take some responsibility by reviewing docs *closely* (like an underwriter is required to do) before sending them in – and by getting that full (organized and well noted) package to your lender well in advance, say at least 15 days before funding. Know what "Red Flags" are, remember that rush deals and last minute docs ARE red flags for lenders and insurers.

    A wise man once said "There is no such thing as a mortgage emergency.”.

  • tom on 2015-08-27 6:04:38 PM

    Tyler, in a refinance case, you could still change the lawyer and close the deal. You must be new in mortgage industry so will not blame you.

  • frank on 2015-08-27 6:08:42 PM

    Tyler may be new in business.

  • Ross Taylor on 2015-08-27 6:28:22 PM

    This was my deal the article refers to. The lawyer's info was provided to the lender two weeks prior, and the lawyer was duly instructed. The lender advised on the closing date there was a problem with the lawyer and they refused to close.

    My client was so upset with this lack of professionalism (his words) he refused to change his lawyer and left me and was funded at the bank he works for within a few days.

    It's hard enough to win the trust and the business of an actual bank employee, and stuff like this just shoots ourselves in the foot and drives the client away.

    We accept the lawyer may have been unacceptable, but do tell us all well before the closing date please. Otherwise, please just close and do a better audit job on the next deal that lawyer's name is on.

  • CW on 2015-08-27 10:00:17 PM

    I had a lender back out of a deal 10 days before possession date because the city lot had two titles and didn't fit the mold for their investors. The client and I were both blindsided with the news after all conditions had been met two weeks prior. The trust I had earned from the client was quickly erased, and while I scrambled to find a lender to pick up the pieces, the client walked into a branch and walked away from my service. Bye-bye paycheck, and Bye-bye 30-40 hours of work. This totally could have been prevented had the lender called title and noticed this issue during underwriting. Obviously in this type of situation the broker is the one who suffers. The lender's name (who was basically anonymous to the borrowers, and Lawyers') is soon forgotten. The only recourse we have as Broker's is to punish that lender for their blunder by not sending deals to them. Is this enough? I have issues with lenders not being accountable. It seems we can 'lock down' clients with a commitment letter, why can't we lock down the lender.

  • Jim T, Advent Mortgage on 2015-08-27 10:33:44 PM

    It sounds like lender-specific issues here. I fund between 70 - 90 deals a month and have never had these types of issues. Maybe Scotiabank and National Bank have their are ahead of the pack.

  • John Gimblett on 2015-08-28 10:21:01 AM

    Well folks..as usual, divided we fall. The lenders are justifiably mandated to create as much profit as they can, in the real world this usually means less expense for front line salaries. So you understaff on U/Ws + conditioners, add a touch of not replacing BDMs, and add a pinch of lack of "expensive" training and the bottom line increases. What would happen if a national broker association employed a Director of Broker Service to receive these complaints.... then demand a review with the lender to focus on an increase in lender service levels with real repercussions for the lender. Sure beats the whining on mortgagebrokernews.

  • Ron Butler on 2015-08-28 11:22:49 AM

    The big issue really are these pre-funding audits at some lenders. File is complete then it is not complete 2 days before closing, lawyer is okay and then not okay 2 days before closing. the bottom line is no matter what you say to the client (who is now really "the victim") there is no saving your relationship with that person. Am not talking about a last minute appraisal problem or a failed verbal on the job letter, I am talking about "whoops, was file complete now not file complete".

    Pre-funding audit breakdowns are a component of this brokerage business that is doing real harm to our reputation with the public. Lenders: please do the audit if you must but it has to happen 7 business days before closing.

  • Don Boychuk on 2015-08-28 11:53:19 AM

    let's think about this...........the lender instructs a lawyer that is not approved and the broker and client are penalized. What happened to the person that instructed the file.
    Who was the lender????????????

  • Don Boychuk on 2015-08-28 11:56:56 AM

    Why did the lender instruct and lawyer that was not on the list. The lender should honour their commitment if it is a lender error and deal with the employee that made the error not the client and broker.

  • Frank on 2015-08-29 9:20:16 PM

    A bank employee hired you to do his refinance while he could do that through his bank?? ? Give me a break..

  • Dan on 2015-08-31 1:50:10 PM

    "What would happen if a national broker association employed a Director of Broker Service to receive these complaints.... then demand a review with the lender to focus on an increase in lender service levels with real repercussions for the lender. Sure beats the whining on mortgagebrokernews."

    Good suggestion John. A position such as this could weed out the unfounded and inappropriate complaints, and also address deficiencies on the Lender AND Broker side. (lets take some accountability here, instead of always passing the buck)

  • OkanaganBroker on 2015-08-31 2:54:59 PM

    In my experience Monolines are the only lenders to ever have caused me issues after Suject Removal & prior to closing...hence why I rarely will use them anymore. When I deal with my Bank or Credit Union lenders, once I have "Subject Removal" the deal is 100% complete, It gets instructed & I have never had any issues with them.
    The Monoline funding procedures have caused some of my Lawyers & Notaries to either charge additional fees when dealing with these mortgages, and one Lawyer won't even accept ANY monoline deals...

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