In The Know

CMBA answers Policies & Procedures questions and shows you the exact Rule & Regulation where we got the answer from.

Be… In the Know!

The Voice – July 13, 2017

Q- If I am re-financing a clients residence and they owe CRA back personal taxes. Do I have to pay out the taxes owing?

  1. No. Not unless CRA has registered a lien against the property or a Judgement against the client. Although it is advisable that the tax owing situation be addressed. Because CRA can be “aggressive” in their collection techniques such as garnisheeing the individuals wages or seizing and freezing their bank account(s). Putting the client in a difficult position to make his mortgage payments. Which will not make the mortgage lender happy!

The Voice – March 9, 2017

Q: If I collect a cheque or cash for an appraisal, what do I do with it?

A: As any monies other than a Brokerage or a Finders Fee actually is for a third party, they are deemed to be Trust Funds and as such MUST be deposited in the Brokerages Trust Account.

MBLAA 2006 Ontario Regulation 188/08

The Voice – February 23, 2017

Q: Can a person who is under Power of Sale still list and sell his house?

A: Yes, they are the owner of their house right up until the day that the Mortgagee under the Power of Sale action sells the property to a third party.

 

The Voice – February 2, 2017

Q: I’m a mortgage agent and keep hearing about this AIR that needs filing with FSCO. Do I have to do one?

A: No, not you. But all licensed mortgage brokerages and administrators are required to complete and submit an Annual Information Return (AIR) no later than March 31st of each year.

Rule & Regulation: O. Reg. 193/08, s. 2 – Annual information return: 2. On or before March 31 of every year, every brokerage and every mortgage administrator shall give the Superintendent an annual information return for the previous year in a form approved by the Superintendent.

The Voice – January 26, 2017

Q: I’m being offered a trip as an incentive for sending a lot of business to one specific lender. Is this above board?

A: As long as your Principal Broker is aware.

Rule & Regulation: O. Reg. 187/08, s. 5. – Remuneration, non-monetary incentives: 5. (2) Despite section 4, a broker or agent may receive, directly or indirectly, an incentive other than money from an outside brokerage or a financial institution for dealing or trading in mortgages if all of the following conditions are satisfied:

  1. The broker or agent has the consent of his or her home brokerage.
  2. The home brokerage and the outside brokerage or financial institution have a written agreement governing the provision of the incentive to the broker or agent.
  3. The broker or agent has a written agreement with the outside brokerage or financial institution governing the provision of the incentive to him or her.
  4. Both agreements require the outside brokerage or financial institution to give the home brokerage particulars about the following matters both periodically and upon request:
  • i. the incentives provided by the outside brokerage or financial institution to the broker or agent during the applicable period, and
  • ii. if an incentive entitles the broker or agent to exercise one or more options in the future, particulars of the options exercised during the applicable period.

The Voice – January 19, 2017

Q: When do I NOT have to provide a Borrower Disclosure Form?

A: It does not have to be provided in a transaction where the borrower is a business entity, ie. the borrower is a corporation and/or the property is a commercial property. Where this enters a grey area though is if the property, for example, is a commercial enterprise coupled with a residential component (like a convenience store with an apartment above). To further complicate this, is the apartment rental or owner occupied?

Rule & Regulation: O. Reg. 191/08, s. 1. – Application: 1. (1) This Regulation applies to every mortgage other than a mortgage entered into with a borrower who is not a natural person, or a mortgage that a borrower enters into for business purposes.

The Voice – December 22, 2016

Q: My brokerage has an affiliation with an insurance agency that provides mortgage life insurance. Can I insist that my Borrower also take out life insurance?

A: No! Mortgage Brokers/Agents are not allowed to conduct what is referred to as “tied selling”. You may offer the insurance, but you cannot insist upon the client taking it. In addition, you are probably not licenced to sell life insurance.

Rule & Regulation: O. Reg. 188/08, s. 15 – Restriction re: tied selling: 15. (1) A brokerage shall not coerce a borrower, lender or investor to obtain a product or service from a particular person or entity, including the brokerage, as a condition for obtaining another service from the brokerage.

The Voice – December 15, 2016

Q: If I have a current or past client complain about me or my service, what should I do?

A: Return the client’s call immediately and try to resolve the complaint. If the client is not satisfied, inform them that they should speak to your Principal Broker or designated Complaints Officer.

Rule & Regulation: O. Reg. 188/08, s. 41 – Duty to establish complaints process: 41. (1) A brokerage shall establish a process for resolving complaints from the public about the mortgage business activities of the brokerage or of any broker or agent authorized to deal or trade in mortgages on its behalf.

(2) The brokerage shall designate one or more individuals to receive and attempt to resolve complaints from the public, and each designated individual must be an employee of the brokerage or someone who is otherwise authorized to act on its behalf.

The Voice – December 8, 2016

Q: If I arrange a mortgage for a client, and later when the mortgage is up for renewal, assist the client as to what term the client should renew at – should I issue a renewal Borrower Disclosure Document? Even if I’m not receiving any remuneration?

A: Yes, you should.

Rule & Regulation: O. Reg. 188/08, s. 24 – Duty re: suitability of mortgage for customer: 24. (1) A brokerage shall take reasonable steps to ensure that any mortgage or investment in a mortgage that it presents for the consideration of a borrower, lender or investor, as the case may be, is suitable for the borrower, lender or investor having regard to the needs and circumstances of the borrower, lender or investor.

The Voice – December 1, 2016

Q: I’m cleaning up my files for year end – is it OK for me to delete any records from before 2005?

A: Yes. Basically, you must keep all file records of a mortgage for 11 years – the 5-year term of the mortgage plus six more. It is highly advisable to keep an electric copy of all correspondence and notes, including applicable mortgage documents from the file.

Rule & Regulation: O. Reg. 188/08, s. 48 – Records retention: 48. (1) A brokerage shall retain all records that relate to a mortgage or mortgage renewal agreement, as the case may be, for at least six years after the expiry of the term of the mortgage or renewal or other expiry of the mortgage transaction.

The Voice – November 24, 2016

Q: How much can FSCO charge for an AMP anyway?

A: A broker/agent can be charged a penalty of $250 for each compliance failure (keeping address/contact info current with FSCO, or authority to deal in mortgages on behalf of a brokerage). A brokerage/administrator can receive AMPs from $500-$1000 for non-compliance (filing AIR, establishing trust accounts, maintaining Policies & Procedures, etc). With your E&O insurance coverage, they increased the non-compliance AMP in 2010 to $1,500 for a first occurrence and $3,000 for a second one.

Rule & Regulation: O. Reg. 193/08, s. 15 – Penalty amounts: 15. (1) If a brokerage or mortgage administrator fails to comply with a requirement of this Regulation, the following summary administrative penalty may be imposed under section 40 of the Act:

  1. $1,000 for each failure to comply with section 2, 3, 4 or 13.
  2. $500 for each failure to comply with any other provision of this Regulation.  O. Reg. 193/08, s. 15 (1).

                (2)  If a broker or agent fails to comply with a requirement of this Regulation, a summary administrative penalty of $250 may be imposed under section 40 of the Act for each failure to comply with section 6 or 7 or subsection 12 (2) of this Regulation.

The Voice – November 17, 2016

Q: How many days after receiving a notice from the Superintendent do I have to request a hearing by the Tribunal?

A: You have 15 days to request a hearing – and it must be done in writing.

Rule & Regulation: MBLAA, 2006 – Hearing requested: 35. (4) If the person or entity requests a hearing in writing within 15 days after the notice under subsection (3) is received, the Tribunal shall hold a hearing.

The Voice – November 10, 2016

Q: If I am not receiving a Finders Fee, nor am I charging a Brokerage Fee, do I have to provide the borrower with a Borrowers Disclosure Form?

A: As a licenced Mortgage Broker/Agent, you have a Fiduciary Duty to provide to your client total disclosure of the terms and details of the mortgage transaction, whether you are receiving remuneration or not.

Rule & Regulation: MBLAA, 2006 – Mortgage broker’s/agent’s license: 8/9. (2) A mortgage broker’s/agent’s licence authorizes the licensee to deal in mortgages in Ontario or trade in mortgages in Ontario on behalf of one specified mortgage brokerage by engaging in the activities permitted under the licence issue to the licensee.

The Voice – November 3, 2016

Q: Do I need to disclose to my client the amount of compensation I’m getting for their mortgage?

A: You need to tell them the type of compensation, not the amount.

Rule & Regulation: O. Reg. 188/08, s. 21 – Fees, etc., payable by others: 21. (1) A brokerage shall give the following information, in writing, to a borrower in connection with a mortgage or renewal that it presents for the borrower’s consideration:

  1. Whether the brokerage has received, may receive or will receive a fee or other remuneration, directly or indirectly, from another person or entity in connection with the negotiation or arrangement of the mortgage or renewal.
  2. If a fee or other remuneration is or may be payable to the brokerage, the identity of the other person or entity, the basis for calculating the amount of the fee or other remuneration and, in case of a benefit other than money, the nature of the benefit.

The Voice – October 27, 2016

Q: Can I advertise an “interest-free” period for new mortgage applications?

A: Yes, but your ad must indicate whether interest accrues during the period and is payable after the period.

Rule & Regulation: O. Reg. 191/08, s. 20. – Advertising – interest-free periods: 20. (1) If a mortgage brokerage advertises a mortgage and if the advertisement includes a representation, express or implied, that a period of the mortgage is free of any interest charges, the advertisement must indicate whether interest accrues during the period and is payable after the period and that information must be provided at least as prominently as the representation, if it was express, or in a prominent manner, if it was implied.

The Voice – October 20, 2016

Q: Is a Nexus card enough proof of identification for my client’s application?

A: Lenders generally require two pieces of ID – the first must be issued by a federal or provincial government agency and must contain a photograph. So yes, the Nexus card meet those criteria. However, it doesn’t include your legal name or signature, so a second piece of positive ID is required.

Rule & Regulation: Service Ontario has a table listing all forms of acceptable identity documents.  Nexus is #20 on the list. View it by clicking here.

The Voice – October 13, 2016

Q: After I have taken a loan application and conducted a credit report, who can I share that information with?

A: The two credit reporting agencies in Canada (Equifax & TransUnion) provide credit reports only to respected members. Therefore you may only share credit information to other credit grantors, with the express permission of the client. The law of Canada, namely PIPEDA, govern the sharing of private information with others. The fines for unauthorized sharing of personal private information can be substantial.

Rule & Regulation: To read more about PIPEDA (Personal Information Protection and Electronic Documents Act), please click here.

The Voice – October 6, 2016

Q: My brokerage just got hit with an AMP (Administrative Monetary Penalty) by FSCO. How many days do I have to pay up?

A: You must pay within 30 days.

Rule & Regulation: O. Reg. 192/08, s. 5. – Deadline for paying s. 40 penalties: 5. (1) A person or entity on whom a penalty has been imposed under section 40 of the Act shall pay the penalty no later than 30 days after the person or entity is given notice of the order imposing the penalty.

The Voice – September 29, 2016

Q: If a client is taking a mortgage from me that I arranged, can I insist that he take an insurance product that I also arranged?

A: Absolutely not. You are prohibited from engaging in tied selling.

Rule & Regulation: O. Reg. 188/08, s. 15 – Restriction re: tied selling: 15. (1) A brokerage shall not coerce a borrower, lender or investor to obtain a product or service from a particular person or entity, including the brokerage, as a condition for obtaining another service from the brokerage.

The Voice – September 22, 2016

Q: I just had an agent quit and move to a new brokerage. How soon do I need to notify the Superintendent?

A: Changes of staff must be updated within five days, NOT five business days.

Rule & Regulation: O. Reg. 193/08, s. 12 – Change of authority to act on behalf of brokerage: 12. (1) If a mortgage broker or agent ceases to be authorized to deal or trade in mortgages on behalf of a brokerage, the brokerage shall notify the Superintendent no later than five days after the authority ceases.

The Voice – September 15, 2016

Q: My Finders Fee didn’t amount to much – can I also charge a brokerage fee?

A: Yes.

Rule & Regulation: O. Reg. 188/08, s. 21 – Fees, etc., payable by others: 21. (1) A brokerage shall give the following information, in writing, to a borrower in connection with a mortgage or renewal that it presents for the borrower’s consideration:

1. Whether the brokerage has received, may receive or will receive a fee or other remuneration, directly or indirectly, from another person or entity in connection with the negotiation or arrangement of the mortgage or renewal.

2. If a fee or other remuneration is or may be payable to the brokerage, the identity of the other person or entity, the basis for calculating the amount of the fee or other remuneration and, in case of a benefit other than money, the nature of the benefit.

3. Whether a broker or agent who is authorized to deal or trade in mortgages on the brokerage’s behalf has received, may receive or will receive payment of an incentive from another person or entity in connection with the negotiation or arrangement of the mortgage or renewal.

4. If an incentive is or may be payable to a broker or agent, the nature of the incentive and the identity of the other person or entity.

The Voice – September 8, 2016

Q: Is my brokerage required to document verbal complaints?

A: All complaints should be brought to the attention of the Principal Broker or designated Complaints Officer immediately. However, the brokerage is required to only keep a record of written complaints.

Rule & Regulation: O. Reg. 188/08, s. 41 – Duty to establish complaints process: 41. (3) The brokerage shall keep a record of all written complaints received from the public by the brokerage and all written responses by the brokerage.

The Voice – September 1, 2016

Q: Can I hold another job, while also being a mortgage agent?

A: Of course you may conduct other businesses, work part-time or full-time jobs, or hold other licences at the same time as you are licensed as a Mortgage Broker/Agent. As long as that business is conducted separately from your mortgage business, and there is no direct conflict of interest.

Rule & Regulation: O. Reg. 188/08, s. 56 – Duties re: concurrent businesses: 56. A brokerage that engages in another business concurrently with carrying on the business of dealing or trading in mortgages or carrying on business as a mortgage lender shall not allow the other business to jeopardize its integrity, independence or competence when carrying on the business of dealing or trading in mortgages or carrying on business as a mortgage lender.

The Voice – August 25, 2016

Q: My client wants me to arrange a reverse mortgage for them. Don’t they need to talk to a lawyer first?

A: Yes they do, and you need to have a signed letter from that lawyer before proceeding.

Rule & Regulation: O. Reg. 188/08, s. 29 – Duties re: reverse mortgages: 29. (1)  A brokerage shall not arrange or enter into a reverse mortgage with a borrower unless the brokerage receives from the borrower a written statement signed by a lawyer stating that the lawyer has given the borrower independent legal advice about the proposed reverse mortgage.

The Voice – August 18, 2016

Q: I’m not sure if I have a potential conflict of interest in a file. What are some examples?

A: Conflicts of interest are a key area of disclosure to Clients, ensuring they are always aware of where there may be a potential motivation to not act in their best interests (ie. presenting a Client with one mortgage over another because you are going to receive a higher commission is a Conflict of Interest if the rate to the Client is lower for a lower-paying mortgage product). Other examples include:

    • The Mortgage Broker/Agent is related to the Appraiser;
    • The Lender is related to the Mortgage Broker/Agent; or the Lender is a family member of the Borrower;
    • When the Mortgage Brokerage/Broker/Agent is also the Lender;
    • If the Mortgage Broker/Agent or his/her spouse uses a self-directed RRSP to fund the mortgage for the Borrower;
    • Receiving travel points, free holidays, or other incentives that are normally not available;
    • When a Mortgage Broker/Agent acts for both the Borrower and Lender;
    • If the Mortgage Broker/Agent receives higher “bonus” commissions for working with a specific Lender during a specific timeframe;
    • If the Principal Broker is also a Real Estate Broker who is involved with listing and/or selling a property.

Rule & Regulation: O. Reg. 188/08, s. 27 – Disclosure of conflicts of interest or potential conflicts of interest: 27. (1)  A brokerage shall disclose in writing to a borrower, lender or investor, as the case may be, any conflict of interest or potential conflict of interest that the brokerage or any broker or agent authorized to deal or trade in mortgages on its behalf may have in connection with a mortgage or a trade in a mortgage that the brokerage presents for the consideration of the borrower, lender or investor.

The Voice – August 4, 2016

Q: Since I mostly do condominium mortgages, can I call myself “The Condo Mortgage Specialist”?

A: Yes. You may use descriptive phrases such as this, but it has to be in addition to your title of Mortgage Agent or Mortgage Broker which should appear immediately following or below your name.

Rule & Regulation: O. Reg. 188/08, s. 6 – Use of name, etc., in public relations materials: 6. (4)  If, in its public relations materials, a brokerage refers to a broker or agent, the materials must include at least one reference to the broker or agent that includes one of the following titles…”mortgage broker”, “broker”, “mortgage agent” or “agent”.

The Voice – July 21, 2016

Q: Can I hire my brother to work for me arranging mortgages?

A: No. If they are not licenced, they cannot give quotations or discuss the details of the mortgage commitment with the client.

Rule & Regulation: O. Reg. 188/08, s. 43 – Duty re: authorization of brokers, agents: 43. (1)  A brokerage shall not authorize an individual to deal or trade in mortgages on its behalf unless the brokerage takes reasonable steps to satisfy itself that the individual is eligible to be licensed as a broker or agent.

The Voice – July 7, 2016

Q: Do you need to include both your licence number and the brokerage licence number in your PR materials?

A: It is not required to include the Broker/Agent licence number, but it is permitted. The authorized name and brokerage licence number is absolutely required in all of its PR materials.

Rule & Regulation: O. Reg. 188/08, s. 6 – Use of name, etc., in public relations materials: 6. (1)  A brokerage shall disclose its authorized name and its licence number in all of its public relations materials and the name and number must be clearly and prominently disclosed. 

The Voice – June 16, 2016

Q: You are prohibited from taking a deposit for services for any mortgage below this amount.

A: $400,000

Rule & Regulation: O. Reg. 188/08, s. 37 – Advance payment by borrower: 37.  (1)  If the principal amount of a mortgage is $300,000 or less, a brokerage shall not require a borrower to make, and shall not accept, an advance payment or deposit for services to be rendered or expenses to be incurred by the brokerage or any other person.

Note: On January 1, 2016, subsection 37 (1) of the Regulation is amended by striking out “$300,000” and substituting “$400,000”. (See: O. Reg. 153/15, s. 4).

The Voice – June 2, 2016

Q: How many days do you have to update your contact info with FSCO? (ie. business/residential address, phone number, fax number, email)

A: Five days, NOT five business days. The rationale being that changes of this nature are planned well in advance.

Rule & Regulation: O. Reg. 193/08, s. 6-9 – Change of address for service: 6.  If a licensee changes the licensee’s mailing address in Ontario, the licensee shall give the Superintendent particulars of the new address no later than five days after the change occurs.

Change of other contact information: 7.  If a licensee changes the licensee’s e-mail address, phone number or fax number, the licensee shall give the Superintendent particulars of the new address or number no later than five days after the change occurs.

Change of principal place of business: 8.  If a brokerage or mortgage administrator changes the location of its principal place of business in Ontario, the brokerage or mortgage administrator shall notify the Superintendent no later than five days after the change occurs.

Change of offices open to the public: 9.  If a brokerage or mortgage administrator opens or closes an office in Ontario that is open to the public, the brokerage or mortgage administrator shall notify the Superintendent no later than five days after doing so.

The Voice – May 20, 2016

Q: How quickly do I need to deposit funds into a trust account?

A: Within two business days after receiving the funds.

Rule & Regulation: O. Reg. 188/08, s. 51 – Administration of trust account: 51. (1) A brokerage shall deposit deemed trust funds that it receives into its authorized trust account within two business days after receiving the funds.

CMBA Customized Policies & Procedures Manual:
All Brokerages in Ontario must have an up-to-date Policies & Procedures Manual. CMBA’s 2016 Policies & Procedures Manual includes all the Regulatory changes that have come about as of January 1st, 2016. For more info, or to order your customized manual, contact us at office@cmbaontario.ca

MBLAA 2006, plus accompanying Rules & Regulations:
MBLAA, 2006
O. Reg. 406/07
O. Reg. 407/07
O. Reg. 408/07
O. Reg. 409/07
O. Reg. 410/07
O. Reg. 187/08
O. Reg. 188/08
O. Reg. 190/08
O. Reg. 191/08
O. Reg. 192/08
O. Reg. 193/08
Mortgage Administrators
O. Reg. 189/08
O. Reg. 411/07

Industry links:
Ministry of Finance
FSCO
OSFI
CMHC
CMBA
MBABC
MBAAC
AMBA