Private Lender Disclosure and the Legal Closing Handoff

FSRA's rules place mortgage disclosure obligations on the licensed brokerage. For private lenders, prescribed lender/investor disclosure forms and supporting transaction information can apply; construction and development loans can require an additional Form 1.1 addendum. The lawyer's closing retainer is not a substitute for that regulatory process.

The brokerage should complete its disclosure package on time and ensure the legal instructions reflect the same essential transaction. Counsel should not first discover a lender fee, broker fee, interest reserve, different lender identity or different mortgage amount that was absent from the broker's executed disclosure record.

There may be different documents for different professional purposes, but they should reconcile on lender, borrower, principal amount, rate/term, fees, mortgage position, property and material use of funds. If they do not, the brokerage should determine whether an amended disclosure or lender approval is required before closing.

This consistency is particularly important where a lawyer receives instructions directly from a private lender and those instructions differ from the commitment arranged through the brokerage. The broker should not assume the legal instruction silently overrides its disclosure obligations.

FSRA's private-lender disclosure framework contemplates transaction-related information such as appraisal/value evidence and borrower income, employment and credit information being supplied to the lender/investor to make an informed decision. Where counsel is acting for the lender, the brokerage should have a controlled process for sharing the final lender package or specified materials with appropriate authorization and privacy safeguards.

That does not mean sending the lawyer every internal broker note. It means avoiding a situation where counsel is documenting a loan without access to the lender's actual approved terms or where a material fact known to the brokerage is inconsistent with the legal instructions.

If counsel identifies a need to change the mortgage amount, lender, priority, fees, closing date, guarantee structure or use of proceeds, the brokerage should check the regulatory and lender implications before the revised transaction closes. The fact that a lawyer can draft an amendment does not mean the mortgage brokerage can skip re-disclosure or suitability review.

The same is true where a lender proposes a late fee or deduction not present in the commitment. The broker should resolve whether it is authorized and properly disclosed.

The brokerage should retain its disclosure, suitability and lender-communication evidence. Counsel retains the legal closing file. Neither professional needs to duplicate the other's entire record, but both should be able to explain the same transaction economics and closing outcome.

Where the final funded amount differs from the disclosed/committed amount, the brokerage should document why and what approvals or updated disclosures were completed.