Transcript of Video:
Hi everybody. It’s Rowan Smith with The Mortgage Centre. I heard something today that made me angry enough I had to come and do a blog post on it, and it has to do with lender fees.
Many times when we’re doing a mortgage for residential purchase or refinance or something like that, there are no fees. Most times, I would say most transactions there are never broker fees.
The only time that broker fees apply tends to be when either there’s an extraordinary amount of work that has to go into it-far and above what would be normally asked. I’ve never levied that in my career. Alternatively, it can be when you’re doing some private lending. The reason is private lenders do not pay the brokers.
Now, what’s making me upset was that we’ve sort of gone back to the old days of cowboy financing. What I typically will see in a private mortgage if someone doesn’t qualify under bank guidelines but they’d still like to raise some financing, they’d get a first mortgage. Maybe they have a big down payment. It’s called 25 percent.
They go to a lender. They get a rate of… I’m just grabbing numbers here. Nine percent, let’s say, and they were going to pay a three percent fee. Well, that fee typically will be divided up between the lender and the broker. So the broker would be getting some of the three percent, and the lender will be getting the balance.
Now, what’s sort of happening is we’ve started to see a trend where brokers are calling the lenders and saying, “Listen, will you charge the client a slightly higher rate and take one percent fee, and I’ll take four?”
Now, on a small mortgage where it’s maybe $50,000, it’s not a tremendous amount of money. But a lot of times these large first mortgages are being done on properties that someone’s going to buy and flip. Maybe they don’t qualify under normal guidelines. But they have good income. Or maybe they’ve got money offshore or what not.
Four percent on some of these mortgages is outrageous. And brokers who are charging these fees shouldn’t be allowed to get away with it. I don’t know how they get their clients. I certainly don’t know how they keep their clients. But I know that I’m out there looking to eat their lunch.
If you know anybody that’s being told they have to pay a five percent fee on their mortgage, and as long as the mortgage is excess of what, $100,000. That becomes a very large chunk of change, a very big piece of money that someone’s making on one transaction. Those transactions are no more difficult than a straightforward bank transaction that they’re doing. In fact, they’re oftentimes less difficult because the broker doesn’t have to document the file the way they would with a bank.
Anybody paying those types of fees please call me. It’s Rowan Smith from The Mortgage Centre.