Disclosures FAQ

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  1. How will FSCO ensure that each Mortgage Brokerage is requiring its Mortgage Agents to follow the rules and regulations under the Mortgage Brokerages, Lenders and Administrators Act, 2006?
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  3. I am both a Mortgage Broker and a lender that receives deals from other Mortgage Brokerages. Do I need to disclose any conflict of interest, or is this the responsibility of the Mortgage Brokerage who is submitting the deal?
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  5. Is a Principal Broker or Mortgage Broker/Agent allowed to lend his/her own money to a borrower through the Mortgage Brokerage?
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  7. How should I respond to a client who asks which mortgage term he/she should select, if I know the lender will pay me a higher commission on a five year term?
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  9. If a Mortgage Brokerage only provides referrals to other Mortgage Brokerages, who needs to make the disclosure?
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  11. How far in advance can a client sign a disclosure document?
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  13. What can be done if a Mortgage Brokerage cannot provide disclosure at least two business days ahead of time?
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  15. If a Mortgage Agent has a family member that works for a lender, does this relationship need to be disclosed to a client?
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  17. Do I need to disclose that I am both a Mortgage Broker and lender, if I am only acting as a lender for a specific transaction?
  18.  
  19. I am both a Mortgage Broker/Agent and Real Estate Agent. Does my Mortgage Brokerage need to disclose to the lender and borrower that I will receive both a mortgage finder’s fee and a real estate commission?
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  21. How should disclosure be made to lenders?
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  23. How is a borrower/investor supposed to know if a Mortgage Broker/Agent is lying about being unbiased when searching for mortgages?
  24.  
  25. Do I need to provide written disclosure of material risks for each borrower?
  26.  
  27. How do I disclose to a borrower that selecting a longer amortization in a declining market may have a negative impact if he/she defaults on the mortgage?
  28.  
  29. Can a consulting fee be charged?
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  31. If a borrower needs to have his/her “eyes wide open” going into a mortgage, are standard charge terms (STCs) adequate?
  32.  
  33. If I co-broker a mortgage with another Mortgage Broker, who has the responsibility of providing disclosure and forms to the client?
  34.  
  35. Do I need to provide disclosure and suitability risks to a sophisticated borrower or lender? (e.g. a Mortgage Broker is acting on a $10 million commercial loan application for a borrower who is a developer.)
  36.  
  37. Are my duties different for reverse mortgages, in comparison to standard mortgages?
  38.  
  39. Are the disclosure requirements for commercial property lending the same as those for residential single family properties?
  40.  
  41. Can Mortgage Brokers engage in leasing activities? If so, is leasing governed by the Mortgage Brokerages, Lenders and Administrators Act, 2006?
 

 
 

one1. How will FSCO ensure that each Mortgage Brokerage is requiring its Mortgage Agents to follow the rules and regulations under the Mortgage Brokerages, Lenders and Administrators Act, 2006?
 
The Principal Broker is responsible for the conduct of the Mortgage Brokerage’s Brokers and Agents as the Chief Compliance Officer. FSCO relies on the Principal Broker to ensure compliance under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA). FSCO may hold the Principal Broker and Mortgage Brokerage or Administrator accountable for the conduct of a Broker or Agent.
 
FSCO follows a risk-based approach to regulating all licensed Mortgage Brokerages and Administrators, assessing risks of non-compliance by reviewing complaints from the public, Annual Information Returns from Mortgage Brokerages and Administrators, audited financial statements from Mortgage Administrators, visits to Brokerages, and responses to compliance questionnaires.
 
 
two2. I am both a Mortgage Broker and a lender that receives deals from other Mortgage Brokerages. Do I need to disclose any conflict of interest, or is this the responsibility of the Mortgage Brokerage who is submitting the deal?
 
The Mortgage Brokerage that is presenting a mortgage for consideration has the disclosure duty with respect to a Mortgage Brokerage’s relationships.
 
 
three3. Is a Principal Broker or Mortgage Broker/Agent allowed to lend his/her own money to a borrower through the Mortgage Brokerage?
 
Yes. The Mortgage Brokerage is required to disclose the nature of the relationship between the Brokerage and the lender under a mortgage that it presents for the borrower’s consideration.
 
 
four4. How should I respond to a client who asks which mortgage term he/she should select, if I know the lender will pay me a higher commission on a five year term?
 
You have a duty to ensure the mortgage you recommend is suitable for the client’s needs and circumstances –- not which lender will pay you the higher commission. You should disclose to the client that you receive a higher commission on a five year term, if you recommend it.
 
 
five5. If a Mortgage Brokerage only provides referrals to other Mortgage Brokerages, who needs to make the disclosure?
 
Both Mortgage Brokerages are required to provide disclosure of fees they receive and fees they pay in connection with the mortgage.
 
 
six6. How far in advance can a client sign a disclosure document?
 
Required disclosure must be provided at the earliest opportunity and no later than two business days before the earlier of certain events described in section 35 (for borrowers) and section 36 (for lenders and investors) of Ontario Regulation 188/08 – Mortgage Brokerages: Standards of Practice.
 
 
seven7. What can be done if a Mortgage Brokerage cannot provide disclosure at least two business days ahead of time?
 
The borrower may consent in writing to receive the disclosure any time before signing a mortgage agreement. The investor or lender may consent in writing to reduce this time to one business day.
 
 
eight8. If a Mortgage Agent has a family member that works for a lender, does this relationship need to be disclosed to a client?
 
A Mortgage Brokerage must disclose the nature of its relationship with a lender. If a Mortgage Agent has a family member that works for a lender, the relationship should be discussed with the Mortgage Brokerage’s Principal Broker. Disclosure must be made where the relationship is relevant (e.g. where the transaction is with the lender). When in doubt, disclose.
 
 
nine9. Do I need to disclose that I am both a Mortgage Broker and lender, if I am only acting as a lender for a specific transaction?
 
A Mortgage Brokerage is required to disclose the nature of its relationship with a lender under a mortgage it presents to the borrower. If you only act as a lender in a transaction, and just charge a lender’s fee, there is no obligation to disclose that you are a Mortgage Broker. However, if you are lending and co-brokering a mortgage, you must disclose that you are both a lender and a Mortgage Broker. Your Mortgage Brokerage is required to fulfil the disclosure requirements about its relationship and its role in the transaction.
 
 
ten10. I am both a Mortgage Broker/Agent and Real Estate Agent. Does my Mortgage Brokerage need to disclose to the lender and borrower that I will receive both a mortgage finder’s fee and a real estate commission?
 
Yes. Your Mortgage Brokerage is required to disclose in writing to a borrower whether a Mortgage Broker or Agent will receive payment of an incentive from another person, the nature of the incentive, and the identity of the person. The Mortgage Brokerage is also required to disclose to the borrower the nature of the relationship between the Brokerage and the lender, and disclose to the lender the nature of the relationship between the Brokerage and each borrower. This should include disclosure that the Mortgage Agent is also the Real Estate Agent. You must also ensure that your work as a Real Estate Agent does not jeopardize your integrity, independence or competence when acting as a Mortgage Agent. You cannot use any information that is obtained while working as a Mortgage Agent for any other purpose, without the person’s written consent. Disclosure obligations also apply to Real Estate Agents and borrowers under the Real Estate and Business Brokers Act, 2002.
 
 
eleven11. How should disclosure be made to lenders?
 
Private lenders must be provided with the Investor/Lender Disclosure Statement for Brokered Transactions and other mandatory disclosure requirements. Disclosure must be made in writing.
 
 
twelve12. How is a borrower/investor supposed to know if a Mortgage Broker/Agent is lying about being unbiased when searching for mortgages?
 
Each Mortgage Brokerage must disclose its relationship with lenders, including the number of lenders it has arranged mortgages with during the past fiscal year. Mortgage Brokerages have a duty to ensure the mortgage is suitable for the borrower, lender or investor. Mortgage Brokerages are also required to act with honesty and integrity as a condition of licensing.
 
 
thirteen13. Do I need to provide written disclosure of material risks for each borrower?
 
Mortgage Brokerages are required to provide written disclosure of material risks of the mortgage to each borrower. The Mortgage Brokerage is also required to obtain written acknowledgement from each borrower that this disclosure has been provided. (See section 25 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice.)
 
 
fourteen14. How do I disclose to a borrower that selecting a longer amortization in a declining market may have a negative impact if he/she defaults on the mortgage?
 
The Mortgage Brokerage is required to disclose in writing the material risks of the mortgage and obtain written acknowledgement of receipt from the borrower. (See section 25 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice.) The Mortgage Brokerage also has a duty to ensure the mortgage is suitable for the borrower, having regard to his/her needs and circumstances. (See section 24 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice.) If you have additional concerns, speak to your Principal Broker.
 
 
fifteen15. Can a consulting fee be charged?
 
Any fees that are payable to the Mortgage Brokerage for its services must be disclosed and included in the Cost of Borrowing Disclosure. In addition, in cases where the principal amount of the mortgage is $400,000 or less, the Mortgage Brokerage cannot accept an advance payment or deposit, or require a borrower to make an advance payment or deposit, for services to be rendered or expenses to be incurred by the Mortgage Brokerage or any other person. For more details, refer to section 37 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice.
 
 
sixteen16. If a borrower needs to have his/her “eyes wide open” going into a mortgage, are standard charge terms (STCs) adequate?
 
The standard charge terms (STCs) that specify the terms and conditions of a mortgage, and act as the contract between the lender and the borrower are not sufficient. Refer to sections 18 – 36 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice for the Mortgage Brokerage’s disclosure requirements. For cost of borrowing disclosure requirements, refer to Ontario Regulation 191/08 - Cost of Borrowing and Disclosure to Borrowers.
 
 
seventeen17. If I co-broker a mortgage with another Mortgage Broker, who has the responsibility of providing disclosure and forms to the client?
 
If a mortgage is co-brokered, both Mortgage Brokers are responsible for providing the client the required disclosure, and for maintaining mortgage files for the required period of time. If agreed upon, these responsibilities can be delegated to one of the Mortgage Brokers. However, all required disclosures and forms must be maintained by both Mortgage Brokers.
 
 
eighteen18. Do I need to provide disclosure and suitability risks to a sophisticated borrower or lender? (e.g. a Mortgage Broker is acting on a $10 million commercial loan application for a borrower who is a developer.)
 
In this example, the borrower/client appears to be a business corporation, and thus falls under the “designated classes of lenders and investors” (as defined in section 2 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice), which do not have the same disclosure requirements as other clients (such as those purchasing single family properties). In addition, the requirements in Ontario Regulation 191/08 - Cost of Borrowing and Disclosure to Borrowers do not apply to a borrower that is not an actual person (such as a business corporation), or a borrower who enters into a mortgage for business purposes.
 
 
nineteen19. Are my duties different for reverse mortgages, in comparison to standard mortgages?
 
A Mortgage Brokerage cannot arrange or enter into a reverse mortgage with a borrower, unless the borrower provides a written statement signed by a lawyer. The written statement needs to say that the lawyer has provided the borrower independent legal advice about the proposed reverse mortgage. (For more information see section 29 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice.) This is in addition to the duty to ensure suitability based on the client’s needs and circumstances, and to disclose material risks that apply to other mortgages. Mortgage Brokerages, Brokers and Agents are responsible for fully understanding the mortgage products they offer to their clients.
 
 
twenty20. Are the disclosure requirements for commercial property lending the same as those for residential single family properties?
 
Clients that fall under the “designated classes of lenders and investors” (as defined in section 2(1) of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice) do not have the same disclosure requirements as other clients (such as those purchasing single family properties). In addition, the requirements in Ontario Regulation 191/08 - Cost of Borrowing and Disclosure to Borrowers do not apply to a borrower that is not an actual person (such as a business corporation), or a borrower who enters into a mortgage for business purposes.
 
 
twentyone21. Can Mortgage Brokers engage in leasing activities? If so, is leasing governed by the Mortgage Brokerages, Lenders and Administrators Act, 2006?
 
Mortgage Brokers can engage in leasing activities. Leasing is not governed by the Mortgage Brokerages, Lenders and Administrators Act, 2006. If a Mortgage Broker is engaged in another business, the Mortgage Brokerage should ensure the other business does not jeopardize the Mortgage Brokerage’s integrity, independence or competence. The Mortgage Brokerage should also not use any information that is obtained while carrying on business for any other purpose, without the written consent of the person who is the subject of the information. (See sections 56 and 57 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice.)
 

 
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