A system to flag “fraud and misrepresentation” has been misused by lenders, quick to pin incident reports to brokers, who have little way of getting those records removed, charges a seasoned mortgage professional – preparing to lodge his own complaint.
“I agree that if somebody is doing something fraudulent and has had a pattern of problems develop then, absolutely, that agent should lose the benefit of the doubt,” Paul Mangion, a broker with The Mortgage Centre in Mississauga, told MortgageBrokerNews.ca, “but posting records against an agent that would have had no control over the outcome of a case and then not to allow that agent any real appeal to an impartial third party represents a misuse of REDX.”
His criticism focuses on REDX’s Non-Public Incident Reports, which act as a sort of credit agency for brokers. Its electronic database of agent names contains information contributed by REDX subscribers “regarding incidents of alleged fraud and material misrepresentation and is exchanged on an anonymous basis,” according to the company’s website. Those subscribers not only include lenders and insurers, but other industry service providers, who append those reports to individual broker names as a red flag alerting other subscribers to their concerns.
The anonymous nature of those complaints and the fact that they have the potential to limit a broker’s access to other lenders is problematic, argues Mangion, who worries that brokers are not only being criticized for incidents out of their control, but those that may not, in and of themselves, amount to “fraud or material misrepresentation.”
“I'm talking about cases where marital breakups have led to loan delinquency and the lender is alleging the broker misrepresented the file because he may have known about the marital problems in advance,” the high-volume broker told MortgageBrokerNews.ca. “Or cases involving volume pooling – something lenders themselves encourage – where the broker whose name the deal is submitted under gets a record attached to their name and not the agent who originated the questionable deal in the first place.”
The result can be unwarranted blacklisting for a mortgage professional, charges Mangion, who is personally disputing records attached to his name by an underwriter. His recourse to get those reports expunged involves getting the complainant to agree to remove them, although brokers applying to get copies of those records are not given the names of complainants.
“Upon receipt of each request, we will search the REDX database for REDX reports that reference the name of the requestor,” said REDX, in an email response to MortgageBrokerNews.ca. “Reports provided back to the requestor will contain the same information that was provided to the subscriber… . The name of the submitting subscriber will not be supplied to the requestor.”
That process doesn’t provide a direct avenue for brokers to request records be expunged, although REDX points out that subscriber comments are “a result of their own investigations into incidents of property-related alleged fraud, material misrepresentation, or serious misconduct on the part of mortgage and real estate industry entities with whom they do business.”
Still, that leaves brokers vulnerable to irresponsible reporting from lenders, said Mangion, and no choice but to ask them to remove the record.
“The appeals process is ultimately left to the person who put it there, and not by an impartial third party,” he told MortgageBrokerNews.ca. “The other problem is, why is it done anonymously? When there are no repercussions then people tend to exaggerate the truth.”
The potential harm associated with any improper use of the REDX system is a concern for brokers, especially those committed to the industry in the long term, said Mangion.
“I have seen lenders putting comments onto reports such as a mortgage went delinquent within 6 months or that you cancelled your amp and then subsequently got it back,” he added. “But when a lender checks your report they are only looking at the number of submissions and not what is actually being said in those submissions. So the higher the volume, the more likely you will have more records than a broker who does only a small amount of deals yearly.”