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 MortgageBrokerNews.ca. “I don’t mind that, but all lenders should be held to the same standard.”
Evans told MortgageBrokerNews.ca 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 MortgageBrokerNews.ca. “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.