New Home Warranty Certificate

New Home Warranty Certificate

• It is mandatory for home builders to provide new home warranty coverage on newly constructed and proposed new homes and condominiums in some provinces
• A builder's warranty typically provides buyers with a one-year warranty on minor items like scratched paint, broken drywall, and chipped tiles
• New home builder warranties are not mandatory in Alberta at this time
• Not all home warranties provide the same coverage, and condominium warranties can differ
• It is important to ensure any lender criteria are covered within the warranty
• Third-party new home warranty providers are private, not-for-profit companies
• These companies are established by the home-building industry, not by insurance companies or government organizations
• New home warranty certificates provide coverage for up to five years, protecting homeowners after the one-year builder's warranty has expired
• Lenders sometimes require the borrower to purchase new home warranty certificate coverage

Offering vs. Selling Insurance

• Any individual who offers or sells insurance must be licensed under the Insurance Act
• It is important to distinguish between offering and selling mortgage life insurance
• Offering insurance allows you to discuss the pros and cons of mortgage life insurance in generic terms
• Offering insurance allows you to offer mortgage life insurance products from a single insurance provider (either a private insurance company or the lender)
• You must hold a restricted insurance license to offer mortgage life insurance to mortgage loan applicants
• Information about becoming licensed to offer mortgage life insurance can be found on the Alberta Insurance Council website or websites of private mortgage life insurance companies

Product Sheets

• Mortgage insurance product sheets, lender product sheets, and creditor insurance product sheets are an important part of lender and borrower security
• Ensuring all parties are fully aware of the product information prevents surprises in the future

Mortgage Insurance Product Sheets

• A mortgage insurance product sheet is a critical tool for both lenders and borrowers
• Provides essential information about the mortgage insurance policy and its benefits
• Clarifies what mortgage insurance covers and who receives the benefit if the borrower defaults
• Clarifies when it is required and how the premium is calculated
• Clarifies who pays the premium and how it can be incorporated into the borrower's mortgage

Lender Product Sheets

• A lender product sheet is an informational document provided by lenders to borrowers
• Outlines the conditions, features, and requirements of various loan products
• It helps enhance transparency and enable borrowers to make informed decisions about their financing options
• Include understanding product details such as payout penalties, early payment options, and additional payment options
• Transferability criteria assists in ensuring the borrower knows what is expected and protects against potential future false claims

Creditor Product Sheets

• A creditor insurance product sheet is a comprehensive document that outlines features, terms, and conditions of creditor insurance policies offered by lenders
• Creditor insurance is designed to provide financial protection for borrowers and lenders
• Protection is provided from unforeseen circumstances such as death, disability, or unemployment
• Product sheets clarify who pays for the insurance and how the policy cost is calculated
• Details who the beneficiary is and under what conditions the policy is used
• Explains how it is different from personal life insurance

Product Sheets Overall

• Product sheets are a valuable tool for both lenders and borrowers
• Facilitate informed decision-making and contribute to the security of all parties in the lending process

Conclusion

• The unit covers mortgage brokers' ongoing processes and administrative work throughout a mortgage's lifespan
• Brokers act as a conduit between lenders and borrowers, and good record-keeping can help maintain relationships

Introduction

• The unit focuses on record keeping, file management, client contact maintenance, and ways mortgage brokers get paid
• Requesting, compiling, verifying, and storing documents for a mortgage application are crucial for a successful underwriting process

By the end of this unit, you will be able to:

• Identify records in a mortgage application file
• Recognize Alberta's mortgage file management regulations
• Know the pros and cons of electronic vs. paper records
• Follow steps to create a mortgage file using origination software
• Identify the impact of privacy legislation on Alberta's mortgage industry
• Understand best practices for protecting client privacy
• Know disciplinary consequences for non-compliance with regulations and standards
• Pinpoint the compliance process steps and personnel
• Identify mortgage broker compensation methods
• Understand how to maintain client relationships professionally

Completing Record Keeping and File Management Tasks

• Section 12 of the Real Estate Act allows industry regulators to set rules for licensees' actions
• Real Estate Act rules includes retaining records on closed and incomplete deals - and the brokerage is responsible for this
• 12(1)(m) requires licensees and former licensees to retain records and books of account
• Outlines the content, manner, and duration for keeping the records (for former licensees, a period not exceeding 3 years after the person becomes a former licensee)

RECA rules

• The Real Estate Council of Alberta requires records to be accurate and complete
• Records must be stored properly to prevent unauthorized access to client information
• Associates retain records until turning them over to their broker
• Brokerages retain for longer

What Is a Mortgage Application File?

• A mortgage application or loan application is a paper or electronic form
• They include consent forms, disclosures, notes, explanations, and supporting documents for a particular loan application
• Clarify any terms used

What Should Loan Files Contain?

• Brokerages must maintain a separate loan file for each mortgage loan application according to s.105 of the Real Estate Act Rules
• This regulation is used whether the application is funded or not
• Short answer: everything

A list of documents related to the transaction:

• Signed written consent to access personal information, such as a credit report
• Applicant's credit report
• Mortgage application file; all mortgage instruments, renewal agreement, etc
• Signed disclosures and service agreements
• Applicant's personal identity documents
• Employment and income verification
• Sources and proof of downpayment
• Proof of assets, investments, or other equity
• Documents for subject property like an offer to purchase, condo documents, copy of title, or Real Property Report
• Insurance application forms, signed waivers, etc
• Proof of separation, divorce, child support, etc
• Proof of consumer proposal or bankruptcy
• Proof of dissolution of business or partnership
• Copies of communications via email, text messaging, social media, meeting notes both hand written and electronic, and all correspondence related to the transaction
• Corporate Searches
• Land Title Searches

How Long Should I Keep My Files?

• Brokerages must retain all files and provide them immediately upon request to Alberta's Real Estate Council (RECA) for audits/investigations
• Mortgage brokerages keep records for three years after the mortgage term ends based on RECA
• RECA may extend retention for ongoing investigations involving those documents
• Equifax and some insurers expect business documents to be maintained during mortgages' lifetime, also other organizations have their own documentation retention requirements
• Keep unsuccessful, unapproved or cancelled transactions in separate mortgage loan files at the brokerage per s.105 of the Real Estate Act Rules

In What Form Should My Records Be?

• Section 82 of the Real Estate Act Rules outlines record-retention needs but allows brokers to establish their own systems
• All files must be secure and idenitified

RECA’s Information Bulletin

• Recommends reading the Real Estate Council of Alberta to determine detailed information about format and storage of retained records on mortgage brokerage records
• Brokers communicate their policies and procedures about retention of staff and records, which apply to all associates and unlicensed staff
• Policy and procedures have multiple concerns
  • Are location and medium storage secure?
  • Are users required to identify by username and biometric access or password?
  • Can the brokerage determine who created the electronic record or modification?
  • Can the brokerage retain record copies electronically before changes?
  • Does the brokerage know who sent records electronically?

Managing Documents Electronically

• Brokerages can have a system to collect, distribute, and store records
• Brokers must provide detailed instructions on how they will manage transaction-related records

Maintaining a Physical Loan File

• There are requirements to maintain physical and electronic documents. Brokerages must maintain a separate physical loan file for each mortgage loan application.
• You need to keep everything that concerns everything related to the application in this file
  • The application itself
  • Signed consent forms and disclosures
  • All supporting and verification documents
  • All notes
  • Correspondence from any source
  • Copies of all original documents
  • Paperwork that pertains to anything about insurances (waivers included)

Impacts of Document Maintenance as an Associate

• Document maintenance and privacy is the brokerage's responsibility but associates should conscientiously record their transactions
• The documentation strategy should meet legislated compliance around records and client recordkeeping
• When associates are out or unreachable, access to their records can affect ongoing deals
• Documents should be turned over to broker before storage/maintenance for each transaction - whether they were approved or not
• Destroy copies in your computer and other sources according to the brokerage's policy
• Provide client records like documents and correspondence to your broker fast according to the Real Estate Act Rules

Note

• The Real Estate Act states mortgage associates should give brokers copies of original records and documents on time:
  • Relating to dealings on mortgages
  • Required from the Act and Rules

Using Mortgage Origination Software

• Mortgage origination software supports managing any step in a mortgage deal
• You prepare, manage, keep up submit, and monitor your mortgage lending requests from any place using Internet

Brokerage Oversight of Mortgage Applications

• Brokerages assure their associates follow the transaction’s rules and actions using the software
• Brokerages make policies governing permissions and set expectations on application stages
• The brokerage makes limits to pull a credit consumer report for the first six months or a senior associate will review the file before submission to lenders
• Brokerages generate reports revealing files made by associates to audit brokerage adherence
• The brokerage is responsible for the acts of its associates - so they make sure procedures are followed or they are restricted/removed

Differences Between Private and Commercial Lenders

• Brokerages on the commercial side and in personal lending may not use mortgage application apps
• This is because:
  • Application Software may manage residential documents
  • Loan assigns have different criteria with no origination complexity
  • Can be really costly for small operations

Working Around This

• When brokers have limits, they may look for solutions for the house - some use the functions to determine credit status but manually complete
• Responses can be given for tracking in electronic tracking and compliance

Common Tasks

• The software lets brokers prepare files standardized, like a mortgage application
• Create a loan application file
• Enter type and reason
• Enter contact (identification, current etc.) for the client
• Enter employment
• Enter income information (this may have common areas of weakness so make it accurate and well known)
• Enter liability
• If you have not talked about insurance with clients, bring it up and get acceptance with any waiver signed. Keep this signed for your files
• Enter asset
• Ensure the data is made accurate
• If the GDS, TDS, and LTV values are not what is expected, then make it what you want by entering the correct data
• Get credit reports while following procedure

Enter Property Details

• Do Google searches of applicant's name, site, and employer to verify income is reasonable
• Verify the employer exists and the site for properties is what you think it should be
• Find processes to verify the appraisal for the property to secure it
• Get mortgage information
• Enter the request details after
• Add qualifying details
• Add people for mortgages assigned
• Update the application that is based on feedback given
• Add entry for lenders when submitting
• Validate for errors and correct it
• Submit to all lenders

Special Features

• Software can provide lender guidelines to make appropriate lender/applicant matches
• Clients connect using customer relationship management system
• Monitor the deals using mortgage origination software - extended tools ensures efficiency and being compliant

Customer Database

• The customer relationship management (CRM) helps keep track of data and get in touch
• Brokerage can have invested a lot so remember this program

Privacy of Personal Information

• Mortgage brokers regularly collect, use, and disclose personal client information
• Privacy legislation compliance obligations exist related to this

Information Disclosure

• Regulations for organizations engaged with commercial activities are handled at a federal level under the PIPEDA (Personal Information Protection and Electronic Documents Act)
• The PIPA (Personal Information Protection Act) shows expectations around the use, collection, and disclosure of information from sectors and enterprises here

The use of documents in RECA rules

• Documents also has to state the use and collection of data from RECA (Real Estate Council of Alberta rules) from real estate transactions, this being personal as well

Storage of Physical vs. Electronic documents

• A lot of brokerages store their records in electronic than in a set of files in papers, which greatly increases ease and mortgage brokers should provide great security practices from technology, which increases the security of consumer data

Many advantages:

• Always accessible
• Easily to know when it was sent (transparency)
• Central hub
• Data increases
• Sharing in its ease

Cons:

• Information can be easily stolen
• Retention of data should be looked out
• Must have compliance to privacy regulations
• Knowledge should be widespread

Information

• Know the company’s policies of private lenders

Client Information

• Stay safe about giving available client information that is your duty
• Brokers have an idea for what happens at data breaches, and may:
  • Have stolen devices or data being put at risk
  • Get systems hacked
  • Transfer information through unsecured devices

Be Conscious about Privacy Practices

• They support the best actions needed
• Collect data and have written approval
• Only let people access the information and not at all
• Have the proper recordkeeping that follows legislation
• Have a cross-shredder

Regulation Impacts on the Mortgage Industry

• The amount the professional handles has to deserve with the security it has
• Laws exist in order to treat this process
• Brokers show transparency for their acts and the reason with for what purpose

How CASL and PIPEDA Affect the Mortgage Industry

• Industries including marketing have benefited with marketing
• Spams were made possible as a form
• Personal data also exists for the increase
• Governments around the world passed CASL and PIPEDA legislation
• What behavior is ok and protecting themselves has been defined
• CASL will have you modify permission emails - making it clear to remove subscribers. Record it for your protection

PIPEDA

• It protects info that has been had
• Beforehand, associates taking data with them from other banks
• Giving clear permission now adds to protect the borrowers by giving explicit choice

Failure to adhere to Regulations

• Following many regulations of the law for these parties, compliance is needed
• Keep data because of regulation laws, and ensure with company policy
• Be federal compliant under CAN-SPAM also

Penalties

• Failure can include thousands of dollars or the revocation of the broker license itself
• RECA handles the complaints, investigations, hearings, with its regulatory members

Receiving Compensation

• At the close of the transaction, an amount is earned
• It involves standards models and steps during the closing phase
• Most places get paid commissioned as opposed to salary (underwriters and administrators)

Fees

• It will be split into brokerages, because the employment is what makes it so. Years and such help define how much fee can be earned
• Higher management can grant that level will be put to higher positions
• Discuss the agreements

Basis Points

• Usually there is a set pay based on point known as bps
  • 1 bps is .01 percent

Models

• Some have extra plus efficiency or value
  • Compensation can exist this path
    • Lender incentive
• When is a client doing refinance