Do you process refinance mortgages? Then you will want to read this.
One very common reason refinance mortgages end up down sold, have their closings delayed or fail to close altogether is because of incorrectly disclosed, undisclosed and undischarged mortgages.
This often happens because:
- Clients are inaccurate with respect to their mortgage balances – they think they have paid down more than they have
- Clients’ lawyers have failed to discharge previously paid off mortgages
- Clients get secondary financing like a personal line of credit and don’t realize it was registered on the home
- Clients try to pull a fast one thinking you won’t find out
In many cases, this comes out after the application is approved, underwritten, the property is appraised and the file is with the lawyer. You never want to get the proverbial call from the real estate lawyer that there is an issue with your deal closing. Once the file is with the lawyer, significant time and expense has been spent on all sides – but there are steps that you can take at the application stage to ensure that this issue is not prevalent.
There is technology available like Purview that you can use to independently verify which mortgages are registered on title and when they were registered.
A really good indication of an issue is when you see that a mortgage was registered 1-2 years ago but the client is saying the balance is far less than what was registered. You can use an amortization schedule to estimate what the balance should be and compare that against what was stated in the application.
What happens if other mortgages come up? This is not necessarily negative and can sometimes represent an opportunity. If there is an undischarged mortgage, you can help your client to contact the lawyer and get it discharged before your deal approaches closing. What if there is a line of credit or other mortgage in second position? You can potentially upsell your deal to pay it off or perhaps if it is a private lender they will agree to postpone their position.
Uncovering this kind of information enables you to provide a better service to your clients. This often happens for innocent reasons and when raised with the client they will appreciate having the opportunity to overcome whatever challenges it presents. They will also see that they are dealing with a professional who is working with the latest and greatest tools and taking all measures to help them get their deal done.
For more information about how you can view mortgages registered on your client’s property please visit Purview at https://www.purview.ca/.
