Under what theory does a mortgage broker become an independent financial advisor who owes a duty to the borrower?
Under what theory does a mortgage broker become an independent
financial advisor who owes a duty to the borrower?
A mortgage broker recommends a particular mortgage.
A mortgage is a financial product.
Therefore it seems to make sense to consider a mortgage broker to be a
financial adviser of sorts. That may or may not mean that the broker
is an FA in the sense of consumer protection legislation surrounding
the financial services industry.
A broker, as distinct from somone selling just one lender's products,
is able to advise on a range of products from a spectrum of lenders.
That's where the "independent" bit comes in, meaning he's not tied
to just one lender.
However, a full-blown IFA would be able to advise on rather more than
just mortgages.
Apart from there being a 'possible' conflict of interests, how can my
brother be sure that a higher offer has genuinely been made?
This may force him to increase his offer against the 'phantom' bidder - if
he chooses to take out a mortgage with this company they have then managed
to obtain a better deal for the seller (fair enough) but also forced him to
take out a bigger loan - which is favourable for the lender.
If he chooses to take his mortgage custom elsewhere then the latter issue
will not exist.
I obviously appear very cynical about the whole affair but I would be
interested to know if the broker has any legal obligation to reveal the
presence of competing offers.