The prohibition on disclosing your client’s confidential information applies to title company employees and mortgage brokers as well as to opposing parties, your work colleagues, and your friends and family members. I have had two situations in the last few weeks in which brokers, faced with late developing issues (e.g., financing failure, late-blooming condition issue), talked too much to the title company/mortgage broker about the client’s situation.
I’m sure the agents in question were anxious. It isn’t often that last minute terminations or other issues arise. If I asked them, the agents likely would tell me they spoke to the title officer to get feedback or to give notice of a possible delay or termination. However, the agents harmed their clients’ interest by speaking to a third party about the late-arising issue before having decided with the client how to handle the situation and before preparing and sending a termination or other notice to the opposing party.
Just like negotiating contract terms (here comes the nag), communications about the status of a contract between buyer and seller should only be shared with title companies and mortgage brokers by sending a copy of signed addenda. And, even then, the reasons for the contract change (bought a new car and increased debt ratio or discovered a misrepresentation on the seller’s disclosure form) are not necessarily the business of the title company or mortgage broker.
I would say that, in at least one of the incidences, the title company employee should have kept the confidence, but he did not. In fact, he immediately contacted the listing broker to advise the broker that closing would be delayed or canceled and told the listing agent why.
As you know, we are sometimes vague about the causes of a financing failure or other late breaking issue so that our buyer-clients can recover their earnest money. Telling anyone other than your principal broker about a late breaking situation before your client has decided what to do is a mistake. Even if you receive an inquiry from the title company or mortgage broker, you should reply with something like this: “an issue has arisen and I will let you know the status as soon as I have authority to do so.”