The Mortgage Instructions Toolkit provides practical guidance for lawyers responding to lender requests in residential real estate transactions. This page addresses issues when a lender intermediary is involved in the transaction.

The situation

Some financial institutions hire lender intermediaries to provide residential real-estate-related services to them and their borrower customers.

Lender intermediaries may take over all administrative aspects of the mortgage arrangements,  including the closing of the mortgage. This puts a third party in the middle of the solicitor-client relationship between the financial institution and the lawyer. This raises the question: from whom are the instructions to register the residential mortgage received: the financial institution or the third-party lender intermediary?

When a lender intermediary is handling mortgage arrangements for a financial institution, the role of a lawyer acting for the borrower and for the financial institution may be problematic. The financial institution instructions may attempt to restrict the lawyer’s role and responsibilities. However, the lawyer has a due diligence obligation to both the financial institution and the borrower and must maintain a solicitor/client relationship with each of them.

In the past, financial institution attempts to restrict the lawyer’s role in residential real estate matters were rebuffed by lawyers and eventually discontinued. Now, lawyers need to be alert to an intrusion of lender intermediaries into their relationship with their client, the financial institution.

Sample lender intermediary marketing information

We specialize in all aspects required for the lifecycle of a mortgage closing for our customers: title insurance, documents processing, tax management, and appraisal management.

Practice guidance

• Clarify the role of the lender intermediary. Are they retaining you on behalf of a lender? Who is your client? Who is giving you instructions? To whom do you report?
• Maintain direct communications with the lender client to clarify instructions, etc.
• Provide required reporting information directly to the lender.
• Be vigilant. Do not simply take on a signatory or witnessing function. You have a professional responsibility to review documents and act with due diligence for your financial institution client and your borrower client.
• Explain the situation and its implications to your borrower client. Your role as a lawyer may be limited and the borrower needs to understand and consent to it.

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