Mortgage Broker

CMB MAGAZINE cmba-achc.ca winter 2016 | 17 HOMEOWNERS AND INVESTORS by and large are aware of the advantages in dealing with monoline lenders: the favourable interest rates and lower penalties for paying mortgages before end of term; greater flexibility compared to the big banks; and of course the lenders' singular focus on mortgages. But with any successful service comes controversy, and recent articles have alleged that some clients are being slapped with surcharges for extra work involved in closing monoline transactions. Specifically, one website describes a recent case in which a client of a Toronto broker received a $100 "monoline surcharge" from their lawyer. e expense was added to a bill for closing costs and intended to compensate the lawyer for "a protracted and confused closing process." e report goes on to describe another case in which an Atlantic-based broker, having endured numerous instances of extra fees, had to assemble "a stable of lawyers" whose fees were the same regardless of lender type. ese and other reports puzzle many brokers and lawyers. Larry Bond, regional sales manager for First National Financial LP, acknowledges that certain types of contracts involve more paperwork than others. "But the paperwork for monoline mortgages is no more onerous than that for other financing arrangements. Quite frankly, I've never come across a situation in which surcharges are passed on to clients." Tony Spagnuolo, president of Spagnuolo and Company (which for the past 20 years has focused on real estate law), says, "I've heard stories of lawyers passing on surcharges for doing extra work on behalf of brokers but never personally come across the practice – and our firm most certainly doesn't charge extra for monoline transactions." As for the reported $100 surcharge, Spagnuolo says, "It's unfortunate that merited a headline. One hundred dollars isn't much, but people think nothing of going to a notary instead of a lawyer if it will save them $20, so it contributes to the bad press lawyers receive overall." Bond, whose company is the biggest monoline lender in Canada ($17 billion in lending last year), suspects a lot of obvious elements have been neglected in the reporting of monoline surcharges. "For example, overlooked are the benefits of the monoline deals that were closed. Even if an extra $100 was charged in some cases, shouldn't it also be acknowledged that the resulting savings in interest rates were likely in the thousands of dollars?" Janet McKeough, a longtime Nova Scotia- based broker, has also heard of (but not experienced) lawyers applying a surcharge for clients who have secured financing through a monoline lender. "I presume it's a very small percentage of tenured lawyers who operate individual or smaller practices, are accustomed to dealing with instructions from one or two lenders, and now have to learn new forms and requirements of others," she says. McKeough adds, "As with all components of a transaction, communication is key. When dealing with a lawyer or firm for the first time, it's a great opportunity for a broker to introduce him- or herself, provide contact information and offer assistance. My experience has been that law firms are very receptive to this." e ongoing success of monoline mortgages remains undisputed, and several points are worth reiterating for the sake of staying focused on the bigger picture. Foremost, the low pricing improves consumer choice and forces the dominant banks to be more competitive. Also, monoline lenders are as secure as all Canadian banks. And from the perspective of brokers, the administrative process of closing monoline deals is unremarkable. "Monolines are broker friendly," says Bond. "As with other types of financing, the key for clients is to find a reputable firm that fits their needs, and many are out there. at's the obvious way to ensure a trouble-free transaction." monolinelenders Brokers and lawyers weigh in on the monoline surcharge controversy BY ROBIN BRUNET Padding THE BILL?

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