The double standard that loses clients

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It’s a necessary step in the origination process, according to industry professionals – but only in the broker channel.

Brokers are asked by lenders to verify funds conspicuously placed in accounts by clients prior to closing, and some are arguing the big banks aren’t held to the same requirement.

“The lender requires us to verify where gifted income comes from in a client’s account,” Jeff Evans, a broker with Mortgage Architects Canada Innovative Financial, told “I don’t mind that, but all lenders should be held to the same standard.”

Evans told about a recent client he lost to the bank, when the bank wasn’t required to go to the same trouble to confirm the history of not only her account, but the account of the person who had gifted her the funds.

“I was asked not only to confirm my client’s account, the lender also wanted three month’s history for her relative’s account (who the gifted funds came from),” Evans said. “She walked into the bank and got approved.”

As brokers have pointed out, verifying the source of a down payment comes from is required to cover regulations.

“Down payment source is important to cover Fintrac regulations,” broker John Meredith wrote in the comments section of “All Realtors must complete a Fintrac form for source of down payments. Don't expect deals to close without proper documents.”

But brokers can arm themselves against last-minute deal issues by ensuring the income – and account history – is verified early in the origination process, say industry players.
  • Sean Binkley, DLC on 2015-11-16 8:50:01 AM

    Stop using a lender that wants to see the account of Mom and Dad gifting the funds, there's lots out there... Seems to me the broker interviewed could have just changed lenders instead of losing the deal?

  • Jake Abramowicz on 2015-11-16 9:32:34 AM

    I could be wrong here however if a client of TD is dealing with a TD Branch, that branch has access to all sorts of information we are not privy to. Say I send my deal to monoline X who has never met the client. Of course they'll ask for much more info than the branch would, since the branch can dip into the accounts to see what's happening where.

    This is indeed a double-standard but one that is a hard fight to take up because of this access to information.

    (I'm using TD as an example of a branch-based lender)

  • Jim T, Advent Mortgage on 2015-11-16 9:41:06 AM

    Simple solution - use lenders that do not require to see 3 months history of the giftor's account.

  • Mel on 2015-11-16 10:04:54 AM

    Aren't you missing the point here? The point is the double standard, not the purported inefficiency on the broker's part.

  • Michele Hall on 2015-11-16 12:16:27 PM

    Keep in mind if the client is banking with them , they can see the history on their system . So that is why the bank can approve easier .

  • Guy on 2015-11-16 1:07:54 PM

    This is nothing new, banks are sitting on funds they want to lend out, they will do the utmost to fund the deal through the branch. If a mortgage agent submits the same deal to the same lender, they will make you jump through so many hoops, it makes the agents position embarrassing. This is why some of my colleagues have switch from being an independent agent to being a bank agent. They say life is that much easier working for a bank, they bend the rules for down payment, TDS ratios so many times.

  • LanceH on 2015-11-16 1:34:36 PM

    But brokers can arm themselves against last-minute deal issues by ensuring the income – and account history – is verified early in the origination process, say industry players.

    And what, the banks couldn't do it early in the process too? That's a poor excuse for the banks not doing their due diligence and the double standard.

  • MP on 2015-11-16 2:47:24 PM

    I believe that Realtors Fintrac forms are to verify the buyer's identity.
    I don't think it is fair that banks and credit unions can ignore the rules for verifying the down payment. I've seen many cases where Credit Unions don't verify the down payment and it was actually a vendor take back to 100% LTV

  • Ray Rochefort, DLC Forest City Funding on 2015-11-16 3:58:30 PM

    Most lenders only ask to confirm that the gifted down payment is in the client's account 2 weeks before closing. I've never had a lender ask for the donor's bank account.

  • Paul on 2015-11-16 7:01:49 PM

    this is not new. I lost many business to the big bank because of this. One big bank only requires 15 days history prior to CLOSING.

    besides this requirement, big bank also allows higher GDS/TDS than us.

    now seems more easy to get approved from big bank than broker.

  • Dan on 2015-11-17 12:15:30 PM

    First this is mentioned "Brokers are asked by lenders to verify funds conspicuously placed in accounts by clients prior to closing", THEN talking about gifts. These are two different points; if there's a large deposit in an account, and it's not a gift, then it needs to be explained and documents provided to confirm the source of funds (nothing new).

    If it's a GIFT - Like many have already said; This is not new, and it is not a double standard.

    That said; requirements to verify source of GIFTED funds do differ from one INSURER to the next (It would be interesting to see how many of these commentator know that there may be different requirements between insurers...)

    Keep "insurer" in mind; while the TD and Scotias do not insure conventional loans, mono-lines insure at all LTV's (they just swallow the insurer fee).

    Again, keeping this in mind, if your deal is with a mono-line and the deal is with CMHC they will have STRICT requirements for gifts.... they require not only a gift letter and funds in an account, but that....:
    "1) The lenders are to confirm the gifted funds are in borrower’s possession at least 15 days prior to closing.
    2) If the gift is deposited within the 15 days of closing, one the following is required:
    - Making a verbal inquiry (phone call) to the donor of the gifted funds to verify the details of the gift letter, or
    - Obtaining a copy of the donor’s personalized cheque, or
    - Obtaining a notarized gift letter, or
    - Confirmation from the donors lending institution that they have the funds on deposit, i.e.: A bank statement from donor showing they have funds available."

    Like Jake was saying; if you lose a deal to TD and that's the clients main FI, they have that information in front of them, so don't be surprised that they were not asked for those doc's.

  • lou on 2015-11-22 9:39:15 PM

    There is some misinformation here regarding REALTORS requirements. REALTORS are required only to identify the source of the deposit not the down payment and it is not verified other than receiving a copy of the check from where the deposit was drawn. There is also a requirement to identify the client for Fintrac and to report suspicious transactions or attempted suspicious transactions

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