An Ontario broker and a private lender are at odds over two deals that fell through – one involving the forfeiture of thousands of dollars in commitment fees as spelled out in the contract.
“Brokers should be aware that there are lenders out there who may be out to collect a fee” even if they don’t fund, says Ranjit Dhillon, principal broker with Centum Mortgage Smart in Toronto. “I saw that this guy had amazing LTVs – in the case of B.C. properties … I thought it was too good to be true.”
Dhillon, who handles 30 mortgage agents in his brokerage and has worked at CIBC head office in the past, has done a lot of private commercial financing throughout Canada. In this case, he says, a deal with Westrock Capital fell through because the lender says there was a failure to disclose what it alleges was a charge of tax fraud.
But Dhillon rejects that allegation, arguing a tax audit was clearly laid out in a credit report.
“How can anyone hide it, if it is on a credit report?” he says, “and (the lender) had the copy of the judgement showing it is already paid out.”
Westrock Capital argues its due diligence pointed to a conviction.
In that first file, the rejection came after the client had already paid $3,500 for a “due diligence and inspection fee, although that inspection was never done. The lender was contractually entitled to withhold that if the deal did not fund through no fault of its own, says a representative of Westrock.
For the second deal, the client also forfeited money. That Ontario client, looking for financing on a gas station property, paid $5,000 for an inspection and $9,000 in a commitment fee. Ultimately, the inspection took place, but the commitment fee was lost due, says Westrock, the failure to submit several documents associated with the file, but only after a commitment letter was issued.
Still, for Dhillon, the deals failed because the lender did not contact him and ask for the required information before the deadline expired. The lender argues that the necessary supporting documentation was not provided within the agreed-to timeframe, although the inspection was conducted and paid for. The lender says the legal fees were refunded.
The lender argues that he, in fact, extended the Ontario deadline by a week.
“This all comes down to mismanagement,” the Westrock representative tells MortgageBrokerNews.ca, “and I have the faxes and email documentation to back it up.”
Dhillon remains concerned about both deals.
"When I am recollecting this scenario, I am also realizing the whole three months communication on these two deals was handled by just (the lender owner) and no one else,” says Dhillon. “There are a lot of independent lenders out there, and most are really great. But you need to do your background checks, get references, and make sure who you are dealing with.”