A husband and wife defaulted on their mortgage and the lender sought possession and the balance of the loan. The husband and wife counter-claimed against the broker and the lender for negligence and sought for the loan and mortgage to be set aside. The basis of the negligence claim was that the broker allegedly falsified the husband’s income to secure a loan which would not otherwise have been made and the lender failed to advise them of their inability to service the loan.
A finance broker, even if paid commission by a lender, is the agent of the borrower, and not the lender. A lender does not owe a borrower a duty to give commercial advice, or to investigate the ability of the borrower to make repayments of the loan, or verify information provided by the borrower.
The court did not believe the husband and preferred the testimony of the broker because the husband admitted he was prepared for the broker to misstate his income to obtain the loan. The court found that the husband did not tell the broker the truth about his income and was not asked to sign a blank loan application form.
The court found that the broker was not the agent of the lender and the lender had no duty to verify the borrower’s information or investigate their capacity to service the loan.