Module 10: The Closing Process

Question 1

What is a commitment lender?

Answer 1

Once the mortgage lender has made the decision to lend a commitment letter (commitment to lend) will be prepared by the mortgage lender and forwarded to the borrower.

In NS the lender provides this commitment to the borrower in the form of an initial disclosure statement of the cost of borrowing.

Question 2

What does the commitment letter include?

Answer 2

Details of the mortgage loan including:
-Name & address of borrower & lender
-Address of property
-Prepayment privileges
-Interest adjustment date
-Advance/funding date
-Principal amount of mortgage loan
-Mortgage insurance
-Payment info
-Annual interest rate and APR
-Loan term and ammortization period

Question 3

What are common conditions that must be met after the commitment is issued and before the mortgage is actually granted?

Answer 3

-Verification of property value through an appraisal
-Ordering a survey or inspection
-Confirmation of down payment
-Confirmation of income and employment
-Additional credit check
-Acquisition of homeowners and or title insurance

Once all conditions are fulfilled the transaction cannot proceed to closing

Question 4

Before the borrower enters into the mortgage it is important they receive some disclosure documentation, provide some additional details:

Answer 4

-Typically disclosure documentation is provided at the same time as the commitment letter, as the disclosure is highly related to the terms and conditions noted in the commitment.

Question 5

What are some general disclosure requirements across jurisdictions?

Answer 5

-Fees and charges to the borrower, annual percentage rate
-Details about the mortgage and how it is to be repaid, other payment details.
-Conflicts of interest
-Material risks associated with the mortgage
-Disclosure of receipt of payment of referral fees
-Disclosure that the associate mortgage broker will be compensated and the method of compensation.

Question 6

What are the key items to remember when making disclosures to borrowers?

Answer 6

-In Writing - If borrower consents electronic documents are permitted
-Complete
-Clear
-On Time - disclosures must be made no later than two business days before the borrower enters into the mortgage agreement
-Agreed To

Question 7

How can you provide a truly suitable mortgage for your borrower?

Answer 7

-Document Your Activities: Broker must provide the borrower with a written assessment of why and how the mortgage is suitable.
-Know Your Products
-Know Your Client (KYC) - Understanding the whole picture about your client

Question 8

What must be disclosed regarding remuneration the mortgage brokerage will receive?

Answer 8

Has, may or will the brokerage receive a fee or other remuneration directly or indirectly from a person in connection with this mortgage transaction.

If a fee or other remuneration is paid to the broker he/she must disclose:
-Identity of person providing fee
-Basis for calculating the fee amount
-The nature of the benefit (volume of discounts)

Question 9

What’s the difference between the APR and the AIR?

Answer 9

The APR includes non-interest related expenses while the AIR is jus the interest rate.

Question 10

In most provinces the mortgage brokerage fees must be included in the APR and disclosed by either:

Answer 10

-associate mortgage broker - if the borrower pays the fee directly to the mortgage brokerage who arranges the loan
-Lender - if the fee is deducted directly from the loan proceeds

Question 11

What are some expenses that would be included in the APR calculation?

Answer 11

-charges for services, transactions or other activity related to the mortgage
-Lawyer fees
-Title insurance when provided by an insurer not chosen by the borrower
-brokerage charges are paid by lender and to be reimbursed by borrower
-Appraisal fees