Mortgage Adviser wants to charge a fee unexpectedly?

pinklady21

Hi everyone
An interesting conundrum - a friend of mine is buying a house. He has contacted a Mortgage Adviser he has used in the past on a no fee basis (MA makes his money thru commission from the lender.)
Mortgage has been arranged - with no mention of any fees to be charged to him at any time. The MA completed the forms and sent them off to the lender. My friend provided his bank statements and payslips to the MA.
He has now received an offer from the lender and thought all was well and asked his solicitor to proceed with the house purchase.

The MA has now called him and said that
"the lender is asking for confirmation of information that we sent them. We will confirm it, but at our own risk. We therefore want to charge you £500 or you may not get the mortgage. This is a lower fee than we would usually charge as we have done business with you before"

Apparently the MA was not aware that an offer had been issued by the lender.

My friend is rather confused - he is unsure whether to pay this additional fee or not - the MA is also getting lender commission as he did previously.

Can anyone throw some light on this?
Is this because the mortgage market is very slow and MAs are trying to boost their income?

What could the lender be asking for that would be at the MA's risk?
Why would the MA be asking for additional fees at this stage?
Could the lender withdraw the offer?


Thank you.

Senior_Paper_Monitor

None of this makes sense - if an offer is issued the original goes to the applicant with a copy to the broker and the solicitor.

What did the latest IDD and the keyfacts for the mortgage say about broker fees ?

Any information that the broker provides to a lender is at his/her own risk in that they are responsible for taking reasonable measures to ensure it is accurate.

The wording (which is clearly third hand and may be inaccurate) indicates that the broker will somehow do other than provide accurate information and wants a bung for doing so - I find it hard to believe that any broker would be so daft.

It is not necessarily unreasonable that a broker could find information about a case (usually some credit based issue or eligibility issue) as it progresses that will result in more work than was expected at the time of initial interviews and will in that case, but it should always be done in writing explaining the issues and impact.

I have no problem with fees and more and more brokers are finding that it is necessary to charge them (demand has dropped, the work involved has increased beyond all proportion and the commissions are dropping) but it should not be done the way you are describing.

dunstonh

What does it say on the key features illustration? That is where charges are laid out.

What could the lender be asking for that would be at the MA's risk?

Nothing comes to mind but maybe one of the mortgage advisers here could think of something

Could the lender withdraw the offer?

yes. However, its unusual (happened during the credit crunch). Typically, lenders wait until they are happy to lend before they issue the offer letter.

GMS

If an offer has been issued then there should be no need to confirm information already sent by the broker as anything submitted would have been checked prior to offer.

If the lender has asked a question due to further information coming to light then they may ask the broker to confirm. Cannot think of a situation where a £500 fee would be justified though.

If the mortgage offer mentions fees which were not on the Initial Disclosure and Key Facts then the broker has input these at application stage which cannot be done. If there is no fee agreement in place then no fee can be charged.

Complete on the transaction and let the broker deal with any chasing later. If it was not disclosed and agreed then there is no chance of enforcement. Could also be worth contacting the FSA or network depending on whether a directly authorised broker or an appointed representative.

pinklady21

Thank you for your prompt replies to this one. I went back and checked with my friend and he confirmed that the situation is exactly as I described it in my OP.
I agree it does not seem to make any sense. And it looks like the MA is trying to pull a fast one. Particularly as he said to my friend that if he did not pay the fee "he would not get the mortgage" and that is it is "not unknown for lenders to withdraw their offer to lend at completion".

He initially spoke to the MA on the phone, and subsequently met with him to discuss what lender/ deal would be appropriate for his circumstances. He did not however get any Key Facts or Initial Disclosure Document at that stage. There was no mention of any fees payable other than the lender's arrangement fees.

The first written note of any fees came on the offer letter.
On the Mortgage offer, an intermediary fee is shown to be paid by the lender to the MA of around £500. There is also another fee to be paid by the application to the MA - the figure listed is £250.

Does his mean the MA put this fee on the application form?

I agree that the fee now being asked for verbally under threat of not getting the mortgage should not be paid. I will pass on the comments about reporting the MA to the appropriate regulator too - this does smack of sharp practice!
Thanks again

kingstreet

You only go to the regulator if the firm is directly authorised by the FSA. If it's an appointed rep of a network, the network is your first point of call. If it's a tied agent of a single company, it's them you have to contact.

Anyone like a small wager it isn't a DA or AR?

pinklady21

Thanks Kingstreet - pardon my ignorance - what is DA and AR?

kingstreet

pinklady21 wrote: »

Thanks Kingstreet - pardon my ignorance - what is DA and AR?

That was for the Directly Authorised and Appointed Representative terms I used earlier. I used the shorthand version for the other practitioners on here because I expect the adviser concerned to be a representative of just one firm, as it's the kind of stunt they are more likely to try.

I'd hazard one or two guesses at the name of the adviser's firm, but it would get me in trouble.

pinklady21

Thanks - and as it happens you are quite correct - their website states
"Directly Authorised by the FSA"

kingstreet

If he does plan to complain, he'll need a copy of the Initial Disclosure Document he was given, indicating no fee was to be payable. Next, he should have a Key Features Illustration which shows any fees payable either at the outset, or on completion.

When I handle a mortgage for someone, I give them the IDD at an initial meeting, then provide another at the follow-up meeting. At that time I also give them the KFI which has been prepared according to their requirements and what we've agreed. I ask the applicant to sign and date the front of copies of the two documents for my records.

Before he does complain, I'd consider asking for a written explanation of why the adviser is now charging a fee when none was disclosed at the outset.

Conrad

There may be something in your freinds situation that is slightly dodge, although you almost certainly wont be told this by your freind. Tell your freind to re - apply to lender direct if they feel a fee is unwarranted.

I suspect the case was fasttracked meaning the lender did not request income proof, but the MA still has to hold it on file, and he may think what he has is a little risky - it could be a hundred different things that make it more risky, although to a lay person the risk will not be apparant. It could be something such as term into retirment where broker has had to confirm he thinks the mortgage will remain affordable after age 65, a risk to the MA as one can never be certain of such things.

As I say if they think they are squeaky clean then cut out the broker and go direct.

Frankly and fees free brokers still left are in my own experience undervalueing the risks they face. You need to earn a lot mof money to justify all the risks, as you never know when you might be out of a job. I know of very honest broekrs loosing license to trade over something they really could not have avoided / forseen. We live in a compnsation culture so the risks are significant. Personaly I would not to the job unless earning a high reward. 4 brokers I know have died or suffered serious illness in thier 50's - thats another side effect of all the risk and worry that needs to be properly compensated for.