One leading mortgage broker has weighed in on the issue of investment referrals, and for him transparency is key.
“What mortgage brokering should be about is (this): I have a borrower who wants a private mortgage and I go to a separate brokerage who has a good deal on the private funds and then we both share in an agreed upon brokerage fee,” Ron Butler
of Butler Mortgage wrote on MortgageBrokerNews.ca. “That's a very transparent transaction.”
The comment was in response to a story about an increased need for clarity in syndicated mortgage referrals, following a FSCO warning about these types of deals.
“From what I can see it doesn’t look like there is any prohibition on a brokerage (accepting referrals from an unlicensed broker); there is a prohibition on the brokerage paying a referral fee to a company that should be licensed as a brokerage,” Joe White, president of the Association of Mortgage Investment Professionals (AMIPROS) told MortgageBrokerNews.ca. “That would be a contravention of the legislation. In that sense it would defeat the whole purpose of the company offering a referral. I wouldn’t call it a grey area; I would call it an area that needs more interpretation.”
While brokers are still waiting for more transparency on the issue, Butler believes the referring brokerage should have a more intimate hand in brokering the deal, and not to simply hand it off to the investment broker.
“If I simply deliver investors to a separate brokerage who then stick-handles the whole interaction between the borrower and the investor that I brought to that totally separate brokerage then what is going on is that the agent or broker is being paid a very large fee to be a "roper": a finder of investors with little or no intimate knowledge of the whole transaction,” Butler wrote. “That is not mortgage brokering as I understand it.”