Mortgage Deals with Your Mortgage Brokerage Professional
If a mortgage brokerage professional has a direct or indirect interest in your mortgage transaction, they must provide you with a number of disclosures and they can’t represent you.
Imagine you’ve hired a mortgage broker to help find you a lender and obtain a mortgage. Your credit rating isn’t great, and the process isn’t going well. So your mortgage broker comes up with a solution: they have some investment money and they want to lend it to you, this would make the mortgage brokerage professional your lender.
Win-win, right? Maybe.
If the mortgage brokerage professional you’re working with becomes involved in your mortgage deal, either directly or indirectly, they need to provide you with a number of disclosures because of the conflict of interest that arises. The deal can still happen, but you must be made aware of the facts.
What is direct and indirect interest?
Direct interest: when a mortgage brokerage professional is personally involved in the mortgage deal.
Indirect interest: when a mortgage brokerage professional is related to, or has a personal relationship with a person involved in the mortgage deal. An indirect interest has the same disclosure requirement as a direct interest.
There is a conflict of interest. Now what?
If a mortgage broker becomes directly or indirectly involved in your mortgage deal, they must disclose the following in writing to you at the earliest practical opportunity:
- the interest, either direct or indirect, that they have in the transaction
- that they are authorized under the Real Estate Act
- the brokerage they are registered with
- the complete details of any negotiations for a further disposition of the mortgage or their interest in it (i.e. do they plan to pass on the mortgage to another lender for a profit)
- any information the professional has that could materially affect the acceptance, issuance, sale or purchase of the mortgage
Because they would be involved in your mortgage deal, they can no longer act as your representative, which means they can no longer provide advice. The deal can go forward if all parties agree, but the mortgage broker will no longer be representing your interests. You may want to get seek out representation from a different mortgage brokerage professional or speak with a lawyer.
I’ve received the disclosures and now I’m not comfortable going forward
As long as you have not signed a mortgage commitment, you can choose not to proceed at any time. If you aren’t comfortable with the conflict of interest that arises after you have already signed a mortgage commitment, you should seek independent legal advice.