Private lending: What are brokers’ duties to their clients?

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“They must exercise due care to homeowners that are not in ideal situations,” he said. “It’s their duty to make explicit disclosures of material risks pertaining to the attributes of short-term private mortgages: fees, the possibility that a private mortgage lender may not offer a renewal, the cost of renewing the mortgage, the likelihood of the homeowner being able to replace or to convert the mortgage a traditional [one].

“Consumers are depending on brokers to provide them with insights and disclosure – you need to be crystal-clear with the consumer. Some may be very confused, [and] some are still of the impression that rates are going to go back down and their home value is going to rise.”

Why a conservative approach is essential in the current private lending climate

Brokers must add to the discussion that home price increases may not necessarily happen and instil a note of caution, Vyner said, rather than “cheerlead” or encourage the borrower into the mortgage without keeping them apprised of what it entails.

“We’re not in the forecasting business,” he added. “We’re in the business of providing crystal-clear, explicit disclosure of potential options that coincide with the consumers’ circumstances.”

The “conservative” part of that approach, Vyner said, means emphasizing to borrowers that interest rates could – and likely will – remain elevated for at least the foreseeable future, with no guarantee either that home values will continue ticking upwards.

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