A “Dear FSRA” Letter Clarifying Disclosure to Borrow

Dear FSRA, 

Do I need to give my client another disclosure to borrow form if the lender-brokerage I’m working with has already prepared one? It seems redundant. 

I am a mortgage broker, and I am representing my borrower client in a private mortgage transaction. The private lender that I am working with is a licensed brokerage, but they act only as a lender. 

Confused Broker 

 

Dear Confused Broker, 

It is best to create your own disclosure so that your client receives clear and understandable disclosure. You can keep these distinct by labelling one as the “Lender’s Disclosure to Borrower” (prepared by the lender), and the “Brokerage’s Disclosure to Borrower” which is your responsibility. 

Ultimately, it is your responsibility to ensure your client receives the right information to make an informed decision about their mortgage. 

A disclosure to borrower form provides important financial information about the borrower’s obligations. 

But one way to protect your client is in being transparent about your brokerage’s role in the transaction. 

The lender-brokerage can provide a disclosure to the borrower, but that does not mean that your obligations are fulfilled. 

When the lender-brokerage prepared the disclosure to borrower form, the disclosed information was about that lender-brokerage’s involvement in the transaction. This does not tell your clients anything about your brokerage. 

For example: 

• Only the lender-brokerage’s role and who they represent will be disclosed. In this case, it’s likely that brokerage is representing themselves as the lender versus working on behalf of both the borrower and the lender as an intermediary. This form likely does not tell your clients who your brokerage is representing.  
• The disclosure of the brokerage’s relationship with lenders will likely be incomplete and only include the lender-brokerage’s relationships with lenders and the number of lenders they represented during the previous fiscal year. It likely does not provide relevant information to your clients about your brokerage and how many lenders your brokerage worked with during the previous fiscal year. 

Such disclosure provides information to clients about whether a brokerage may be in a conflicted position and whether its advice can be impartial. It also helps build trust with clients and reduce the risk that a borrower is placed with an unsuitable product. 

If someone else prepared a disclosure to borrower form that you will be presenting to your clients, review the disclosure document(s) and ensure that the information accurately represents the information required under MBLAA from your brokerage. 

One way for you to confirm is by countersigning the document. If the information is not correct, or is only partially correct, you can supplement it with either additional documentation or amendments. 

Sincerely, 

FSRA