Practice Tip: When Mortgage Professionals can Collect Fees
| October 16, 2019
Advice from your Mortgage Broker Practice Advisor, Gary Siegle
I often get asked, “when exactly can I collect my fee?” It’s a good question because there are many steps involved in closing a mortgage transaction.
The timing is different for residential transactions than commercial transactions.
For residential transactions, you cannot collect (or even attempt to collect) until two things happen:
- The borrower has signed a written commitment (this means the borrower has met all the lender’s conditions)
- The borrower has signed the Cost of Credit Disclosure and at least two business days have passed since the borrower received it or waived the time period for delivery, as required by the Consumer Protection Act Regulations.
The Cost of Credit Disclosure Regulation requires borrowers to receive a disclosure statement for mortgages at least two business days before they incur any obligation to the credit grantor or make any payment in connection with the mortgage loan.
A borrower may waive the time for delivery of the disclosure statement under certain conditions, which are outlined in Information Bulletin: Cost of Credit Disclosure – Mortgage Brokerage.
Commercial and investment mortgages do not have the same restrictions because they are not subject to the cost of credit disclosure provisions of the Consumer Protection Act.
In either case—commercial or residential—the fee must be disclosed and agreed to in writing.
I encourage mortgage industry professionals to use the appropriate disclosure/service agreement:
- Borrower Consent & Disclosure When You Represent the Lender: usually when dealing on behalf of a private lender, the brokerage charges a fee. You will then need to amend clause 6.1 to match the situation
- Acting as an Intermediary Service Agreement: use this form when your brokerage does not represent either the borrower or lender. If your brokerage is charging a fee in addition to receiving compensation from the lender, amend 7.1 accordingly
- Borrower Consent & Disclosure When You Represent the Lender: use this form when your brokerage represents the borrower. If your brokerage is charging a fee in addition to receiving compensation from the lender, amend 7.1 accordingly
Completing the appropriate document will help you meet the mortgage brokerage responsibilities in the Rules.