Enough is enough, argue some industry players, as lenders increasingly request proof of the source of a down payment
Three industry insiders give their views on this contentious issue.
Michele Hall, Mortgage agent, Mortgage Intelligence:
“Lenders do have the right to ask, and they do because of money laundering and fraud. Still, sometimes I think it’s gone too far. A cheque or proof of transfer should suffice as confirmation of a down payment as a gift. You don’t need to do background checks on the gift-giver unless there are red flags. I think you have to use your judgment.
We as brokers have to keep in mind that the clients who deal with their banks won’t have to provide the same amount of confirmation because the bank can look at account history and verify internally, and as brokers, we don’t have the ability to do that. We have to take that extra step.”
Jim Tourloukis, President, Verico Advent Mortgage Services:
“The lenders have the right to ask for whatever documentation they want because they’re lending their money. They set the rules of what they want to see.
Basically, they’re trying to get at this anti-money-laundering issue. That’s what they’re trying to prevent; they want the money to come from legitimate sources. I don’t think it’s unreasonable.
The good news for us brokers is we have multiple lenders we can deal with. If we’re not comfortable with some of the policies, we can move on. We have so many lenders to deal with that not one lender can dictate the policies of the industry.”
Sean Binkley, Mortgage broker, Key Mortgage Partners, Dominion Lending Centres:
“Absolutely. Verifying the source of a down payment is nothing new. What’s been happening lately, though, is lenders are asking for a second tier of verification when the down payment is gifted. So if mom and dad are gifting a down payment, some lenders request proof of that gift through 90 days of transaction history on mom and dad’s account.
Ultimately, lenders cut the cheque, so they have to mitigate the risk. Until we share in the loss, we don’t have much say in underwriting conditions for lending money that’s not ours. If we don’t like it, we [can switch] to a lender that we feel puts fewer roadblocks in the process.”
Michele Hall, Mortgage agent, Mortgage Intelligence:“Lenders do have the right to ask, and they do because of money laundering and fraud. Still, sometimes I think it’s gone too far. A cheque or proof of transfer should suffice as confirmation of a down payment as a gift. You don’t need to do background checks on the gift-giver unless there are red flags. I think you have to use your judgment.
We as brokers have to keep in mind that the clients who deal with their banks won’t have to provide the same amount of confirmation because the bank can look at account history and verify internally, and as brokers, we don’t have the ability to do that. We have to take that extra step.”
Jim Tourloukis, President, Verico Advent Mortgage Services:“The lenders have the right to ask for whatever documentation they want because they’re lending their money. They set the rules of what they want to see.
Basically, they’re trying to get at this anti-money-laundering issue. That’s what they’re trying to prevent; they want the money to come from legitimate sources. I don’t think it’s unreasonable.
The good news for us brokers is we have multiple lenders we can deal with. If we’re not comfortable with some of the policies, we can move on. We have so many lenders to deal with that not one lender can dictate the policies of the industry.”
Sean Binkley, Mortgage broker, Key Mortgage Partners, Dominion Lending Centres:“Absolutely. Verifying the source of a down payment is nothing new. What’s been happening lately, though, is lenders are asking for a second tier of verification when the down payment is gifted. So if mom and dad are gifting a down payment, some lenders request proof of that gift through 90 days of transaction history on mom and dad’s account.
Ultimately, lenders cut the cheque, so they have to mitigate the risk. Until we share in the loss, we don’t have much say in underwriting conditions for lending money that’s not ours. If we don’t like it, we [can switch] to a lender that we feel puts fewer roadblocks in the process.”
