I always tout the use of a mortgage broker over that of mortgage specialist from your corner-store bank, but lately I’ve run into a couple of issues with both varieties.

Perhaps like any other industry, these people are in it to make money.  And if you’re not careful, they just might sell you down the river to suit themselves…

Remember the episode of Seinfeld where Jerry decides to take his car to a different auto mechanic, and soon realizes that if you don’t have a good, trusting relationship with your mechanic, then the next guy will screw you?

To quote George Costanza, “How the heck are you supposed to know if they’re lying – ‘You need a new johnson-rod’ – seriously, what the heck is that?”

I find it’s like this with many other industries as well, and in my business, I prefer when my clients are using my recommendation for a mortgage broker since I know him, trust him, and have done a few dozen deals with him.

Otherwise, how can you know that your clients are getting sound advice and/or receiving the mortgage package that is best for them?

Wouldn’t we be naive to assume that every mortgage broker or mortgage specialist at a bank is working 110% for the client and that they’ve checked their self-interest at the door?

A couple weeks ago, I wrote about the house in Scarborough that my client was trying to buy through power of sale and the difficulties that we ran into.  That was NOTHING compared to what happened once we’d reached a deal, and it was time to go out and get financing.

My client, god-love-her, had for some unknown reason lent all of her money to “a friend.”  He put her money in his RRSP in what is the most bizarre scenario I have ever encountered in my time in this industry.  I still don’t understand it, but that is a topic for another day.  I had her use my mortgage broker, and he told me unequivocally that she couldn’t get financing for the house without that money in her bank account.

The issue is this: for her to tell a lender that she has money, but it’s currently in her “friend’s” RRSP (or in a suitcase burried in her backyard) is simply not sufficient.  The lender needs to know that she has the money, and requires proof.  They wanted to see a bank statement showing this money in her account.  Clearly, she was unable to do this.

My mortgage broker told me that he couldn’t get financing until she got that money out of her friend’s RRSP and into her account.  She couldn’t do that until January 1st (so he could avoid tax ramifications – I know, I know, I still don’t understand what she was doing), but the deal was scheduled to close on January 15th and that wasn’t enough time for the lenders to satisfy themselves that she was financially solvent.

So what did my client do?

She walked into her neighborhood Royal Bank and low-and-behold, the mortgage specialist sitting behind the desk – the person my client had never met before in her life, told my client that she could get her approved 100% with no issues whatsoever.

My client was ecstatic, and gave me the “I told you so” with respect to my mortgage broker and his “refusal” to get her financing.

But I asked my client, “Diana, don’t you think that perhaps this bank is trying to screw you?  You walked in off the street with a conditional offer in your hands, and asked them for a mortgage approval?  OF COURSE they’re going to say yes!”

My client didn’t follow, but perhaps her judgement was blurred by the excitement of getting a house she was in no position to purchase, or the vindication of supposedly proving my mortgage broker wrong.

The moral of the story is: many people in the mortgage industry work on numbers alone, and don’t try to create any client-relationships along the way.  You have to be weary of who you’re dealing with and make sure you aren’t getting screwed.

In another example, a colleague of mine recently worked on a transaction for her 72-year-old client who wanted to purchase a house in Queen West.  This lady had $80,000 in savings and they worked out a conditional deal for a $315,000 house.

The lady used a mortgage broker who was recommended to her by a neighbor, and this broker told her she had to put down 25% as a downpayment, which would equate to $78,750.  It seemed very fishy to me right off the bat.

I asked my colleague WHY the broker was insisting upon the 25% downpayment when she should have no problem putting down 20%.

More to the point, the closing costs on this deal are significant.  There is the $3,200 Ontario Land Transfer Tax, the $2,875 Toronto LTT, $1,600 for legal fees, and moving expenses, furniture, etc.  She’s looking at upwards of $10,000 to close the deal.

So…the obvious question: if she’s putting down $78,750 of her $80,000 life savings, WHERE does she get the money to close the deal?

The mortgage broker never concerned himself with these minute details, and kept pushing for the deal to go through.

I told my colleague to get a second opinion, and she called my mortgage broker.

He told her to STOP working with this woman immediately, since she should not be trying to buy a house.

He asked the simple question that nobody had thought to ask: Where is she going to get the money to make her monthly mortgage payments?

Interesting.

This woman received a $900/month pension, but her monthly mortgage payments would be around $1400 even with the 25% downpayment (which she couldn’t afford anyways).

This woman couldn’t afford the closing costs AND couldn’t afford the monthly mortgage payments.

But the mortgage broker she was using didn’t care, and never brought this to her attention.

I feel lucky to have such a great relationship with my mortgage broker, and I trust him in everything he does or says.

The same claim cannot be made on behalf of many of the people in the mortgage industry, as many are self-serving and push mortgage packages that benefit them more than the clients.

I guess this could be said about any industry; there are a lot of questionable Realtors out there as well that work deal-at-a-time and would sell their clients out for an extra $100.  But in my auto-mechanic example at the top, we realize that perhaps that’s just life and maybe everybody is out to screw everybody, always.

Yeah – really nice sentiment on my part, I know.

But just as Jerry went back to David Puddy on the auto-mechanic episode of Seinfeld because he trusted him emphatically, I find that once you forge a relationship with somebody in any customer-service industry, you simply can’t put a price on it…