Protecting Your Practice in Today’s Market
I wanted to share some important and very timely information with you. Our industry (along with the E&O industry) has seen an uptick in potential claims and regulatory complaints over the past 6 months. Economic pressures and changing market conditions are driving this, making strong risk management practices more important than ever.
In this environment, thorough documentation and proactive communication are your strongest defences. To protect yourself, please ensure you are strictly adhering to the following practices on every file:
- Document Everything: If it isn't documented, it didn't happen. Log summary notes from client calls. Retain text messages, emails - never delete these. File notes must be clear, detailed, and dated. Follow up emails should always be sent to clients after a phone or virtual conversation, summarizing your discussion. This is extremely important when you are discussing items such as rate suggestions, subject removals, approval details and pending conditions.
- Practice Full Disclosure: Always provide transparent, written disclosures regarding application submissions, potential delays, lender requirements, and risks. Clients must fully understand their application status and any challenges encountered. Again, make sure these are summarized in writing.
- Set Realistic Expectations Early: Be upfront about timelines, interest rate fluctuations, and approval likelihoods. Avoid making informal guarantees or overly optimistic projections.
- Request Financing Extensions Early: Never wait until the last minute. If an approval or condition satisfaction is delayed, request written financing extensions from all parties well before the deadline expires. At the very least make sure your clients and their Realtor are aware than extension may be needed so they can start discussions with the listing agent.
- Prioritize Prompt Communication: Respond to client inquiries swiftly. Unanswered emails and delayed responses are a primary trigger for formal complaints.
- Don't be afraid to say NO!: A reminder that you have every ability to decline working with a client if they have unrealistic requests or expectations. Get ahead of this and make a quick decision at the onset.
The current pre-sale market in GVA & GTA is prime for potential claims, so keep this in mind if and when these files come across your desk. In many pre-sale situations we are seeing values land well below the initial purchase price. As you can imagine, this is a tough spot for anyone to be in, and creates significant stress and financial challenges for the buyers. Unfortunately, some people in this situation may look to place blame elsewhere, and possibly even recoup some of their losses if the claim is won. Were the clients unable to close because the value was $100k low, or were they unable to close because the Broker took too long? You can see how this exact scenario could be spun around on a Mortgage Broker. Their legal counsel, the regulators, and the clients themselves will scrutinize every interaction, disclosure, and timeline on file.
All of your clients have become a heck of a lot smarter with the help of AI. We must remember that our clients can and will utilize AI tools such as ChatGPT to verify or gather information. They could even ask it what to request from their broker in preparation for a complaint to a regulator.
I write this note simply as a reminder to stay protected, and never give a client the ability to consider making a claim against you.
Thanks for reading.
Deryk Williamson National Partner
T. 604-763-8928
W. joinabw.ca
If you need guidance on any of the above please contact the compliance department - we are here to help at compliance@abwmortgage.ca.
Thanks for reading.
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