Regulations on Business Requirements that Went Into Effect July 1, 2008

FAQs for Mortgage Brokerages, Brokers and Agents

 

  1. What advertising requirements must be met as of July 1, 2008?
  2. What borrower disclosure requirements must be provided on July 1, 2008?
  3. What investor/lender disclosure requirements must be provided on July 1, 2008?
  4. Which disclosure forms should I use?
  5. What filing/reporting requirements must be met on July 1, 2008?
  6. What type of records are Mortgage Brokerages required to maintain starting July 1, 2008?
  7. What requirements does a Mortgage Brokerage need to meet if it receives trust money?
  8. Do Mortgage Brokerages need to meet any new business requirements on July 1, 2008?
  9. Do Mortgage Brokers and Agents need to meet any new business requirements on July 1, 2008?
  10. What activities/practices are prohibited effective July 1, 2008?

FAQs for Mortgage Administrators


  1. What advertising requirements do Mortgage Administrators need to meet as of  July 1, 2008?
  2. What must be included in an administration agreement on July 1, 2008?
  3. What filing/reporting requirements must be met on July 1, 2008?
  4. What type of records are Mortgage Administrators required to maintain starting July 1, 2008?
  5. What requirements does a Mortgage Administrator need to meet if it receives trust money?
  6. Do Mortgage Administrators need to meet any new business requirements on July 1, 2008?
  7. What activities/practices are prohibited effective July 1, 2008?

1. What advertising requirements must be met as of July 1, 2008?

The advertising requirements that were in effect under the Mortgage Brokers Act are still in effect under the Mortgage Brokerages, Lenders and Administrators Act, 2006.  The existing requirement that advertising cannot be false, misleading or deceptive continues. 

 

Starting January 1, 2009, additional advertising requirements took effect.  The new advertising requirements for Mortgage Brokerages specify that a Brokerage must use its name and licence number in all advertising.  If an ad refers to a Mortgage Broker/Agent, it must include the individual’s name and indicate whether the individual is a Mortgage Broker or Agent.

2. What borrower disclosure requirements must be provided on July 1, 2008?

There are no new cost of borrowing disclosure requirements that took effect on July 1, 2008.

Businesses/individuals should continue to provide disclosure by completing the information that is requested in the Statement of Mortgage Form.

 

On January 1, 2009, a new cost of borrowing regulation and additional disclosure requirements took effect.  FSCO will provide information on these new requirements later this year.

3. What investor/lender disclosure requirements must be provided on July 1, 2008?

There are no new investor/lender disclosure requirements coming into effect on July 1, 2008.  Businesses should continue to provide disclosure by completing the Investor/Lender Disclosure Statement for Brokered Transactions Form. The following information needs to be disclosed to investors:

 

  • Whether the mortgage has been in default;
  • The duration of the default during the past 12 months; and
  • The relationship with the borrower.

A Mortgage Brokerage is:

 

  • Required to advise lenders and investors if the borrower’s legal authority to mortgage a property is in doubt;
  • Required to advise lenders and investors if the accuracy of the information on the borrower’s application or supporting documents is in doubt;
  • Required to report a mortgage application that it suspects is not accurate to prospective lenders; and
  • Prohibited from acting in any mortgage transaction it suspects is unlawful.

4. Which disclosure forms should I use?

Continue using your current disclosure forms.

 

5. What filing/reporting requirements must be met on July 1, 2008?

Starting July 1, 2008, each Mortgage Brokerage is required to:


  • File an annual information return on or before March 31 of each year through FSCO’s Licensing Link website.
  • Notify FSCO within five days of the following changes via the Licensing Link website.
  • Any changes to the Mortgage Brokerage’s contact information, address, principal place of business and any offices that are open to the public;
  • Any changes to the Mortgage Brokerage’s directors, officers, partners or principal broker; and
  • If a Mortgage Broker/Agent is no longer authorized to act on behalf of the Mortgage Brokerage.
  • Immediately notify FSCO’s Licensing & Registration Analysis Unit in writing of the following:
  • Any cancellation or non-renewal of its errors and omission insurance coverage;
  • The establishment of a trust account, within five days of being required to establish a trust account;
  • Any shortfalls in the trust account; and
  • The location of required records if they are not stored at the Mortgage Brokerage’s main office.

6. What type of records are Mortgage Brokerages required to maintain starting July 1, 2008

Starting July 1, 2008, each Mortgage Brokerage is required to maintain the following records:


  • Financial records of its licensed activities in Ontario;
  • Every mortgage application, mortgage instrument and mortgage renewal agreement that is received or arranged by the Mortgage Brokerage;
  • Evidence of errors and omissions insurance with fraud coverage;
  • Any other agreement that the Mortgage Brokerage enters into while dealing or trading in mortgages; and
  • All documents/written information that are given to/obtained from borrowers, lenders and investors.

Each Mortgage Brokerage is required to take adequate precautions to guard against falsification of its records.

 

7. What requirements does a Mortgage Brokerage need to meet if it receives trust money?

A Mortgage Brokerage that receives trust money must: 


  • Notify FSCO’s Licensing & Registration Analysis Unit in writing within five days, if it is required to establish a trust account;
  • Hold deemed trust funds in a trust account;  
  • Maintain a trust account in a bank, credit union, or loan and trust company in Ontario;
  • Deposit trust funds within two business days;
  • Keep trust funds separate from other funds;
  • Pay any interest earned to the beneficial owner, unless otherwise agreed upon in writing;
  • Disburse trust funds according to the terms under which the funds were received;
  • Keep records of transactions related to trust funds;
  • Prepare a monthly reconciliation statement for the trust account;
  • Immediately notify FSCO in writing if there are any shortfalls in the trust account; and
  • Prepare an annual trust account reconciliation within 90 days of the Mortgage Brokerage’s fiscal year end. 

8. Do Mortgage Brokerages need to meet any new business requirements on July 1, 2008?

Starting July 1, 2008, each Mortgage Brokerage is required to:


  • Supervise its Mortgage Brokers and Agents (who will only be able to work for one Mortgage Brokerage);
  • Screen newly hired Mortgage Brokers and Agents for suitability;
  • Notify FSCO if it believes a Mortgage Broker or Agent is not suitable for licensing;
  • Provide its name and licence number upon request;
  • Maintain errors and omissions insurance which includes coverage for fraud;
  • Provide a written response to a written complaint, and advise individuals/businesses that they may refer their complaints to FSCO;
  • Not act in a mortgage that it believes is unlawful;
  • Advise the lender if it doubts the borrower’s legal authority or the accuracy of the mortgage application; and
  • Return documents to their owners at no charge.

9. Do Mortgage Brokers and Agents need to meet any new business requirements on July 1, 2008?

Starting July 1, 2008, each Mortgage Broker and Agent is required to:


  • Work for only one Mortgage Brokerage; and
  • Provide his/her name and licence number upon request.

10. What activities/practices are prohibited effective July 1, 2008?

Starting July 1, 2008, Mortgage Brokerages, Brokers and Agents are prohibited from the following activities/practices:


  • Trading or dealing in mortgages without a licence. – As of July 1, 2008, all Mortgage Brokerages, Administrators, Brokers and Agents must be licensed with FSCO to carry on business in Ontario.
  • Using an unauthorized name. You can only use the name in which you are licensed.
  • Collecting advance fees for mortgages of $200,000 or less.  (On January 1, 2009, this changes to $300,000 or less.) – If the principal amount of the mortgage is $200,000 or less, the Mortgage Brokerage cannot require/accept an advance payment/deposit for services to be rendered and expenses to be incurred by the Mortgage Brokerage or any other person.
  • Receiving funds from investors/lenders in advance.  – The Mortgage Brokerage cannot receive funds from an investor unless an existing mortgage is available, or from a lender unless a mortgage application has been made on a specific property.
  • Indicating that Mortgage Brokerage fees are approved by the government. – You cannot claim that Mortgage Brokerage fees are approved by a government authority. The only exceptions are fees under the Land Titles Act or the Registry Act.
  • Offering guarantees to lenders/investors. – You cannot offer a guarantee to a lender/investor regarding a mortgage loan or mortgage investment.
  • Engaging in tied selling. – Borrowers/lenders/investors cannot be required to obtain a product/service as a condition for obtaining another product/service from the Mortgage Brokerage.

11. What advertising requirements do Mortgage Administrators need to meet as of July 1, 2008?

The advertising requirements that were in effect under the Mortgage Brokers Act are still in effect under the Mortgage Brokerages, Lenders and Administrators Act, 2006.  The existing requirement that advertising cannot be false, misleading or deceptive continues. 


Starting January 1, 2009, additional advertising requirements took effect.  The new advertising requirements for Mortgage Administrators specify that an Administrator must use its name and licence number in all advertising.

 

12. What must be included in an administration agreement on July 1, 2008?

Administration agreements with lenders/investors must be in writing.  These agreements must include the following information: 


  • The name in which the mortgage is registered;
  • Details of the trust agreement if the mortgage is held in trust;
  • Circumstances that the lender/investor may dispose of his/her interest in the mortgage;
  • What happens to payments, including penalties and bonuses;
  • Rights and duties of each lender/investor if a borrower defaults on the mortgage, and the costs for which each lender/investor will be responsible;
  • Procedures to follow in case of a foreclosure or power of sale; Information on administration fees, including how they are calculated and paid; and
  • Obligation of the Mortgage Administrator to promptly inform each lender/investor in case of mortgage defaults, new encumbrances, and other changes that affect the mortgage.

13. What filing/reporting requirements must be met on July 1, 2008?

Starting July 1, 2008, each Mortgage Administrator is required to:


  • File an annual information return on or before March 31 of each year through FSCO’s Licensing Link website. Note: As of March 2009, FSCO will have a fillable form for annual returns available on its website.
  • File the following documents within 90 days of each fiscal year end:
  • Audited financial statements for the year;
  • A report by the auditor about the books, records and accounts; and
  • A report by the auditor about the trust account, assets and liabilities under administration for the year.
  • Notify FSCO within five days of the following changes via the Licensing Link website.
  • Any changes to the Mortgage Administrator’s contact information, address, principal place of business and any offices that are open to the public;
  • Any changes to the Mortgage Administrator’s directors, officers, or partners; and
  • Immediately notify FSCO’s Licensing & Registration Analysis Unit in writing of the following:
  • Any cancellation or non-renewal of its errors and omission insurance coverage;
  • A cancellation or reduction of the Mortgage Administrator’s financial guarantee.
  • The establishment of a trust account, within five days of being required to establish a trust account;
  • Any shortfalls in the trust account; and
  • The location of required records if they are not stored at the Mortgage Administrator’s main office.

14. What type of records are Mortgage Administrators required to maintain starting July 1, 2008?

Starting July 1, 2008, each Mortgage Administrator is required to maintain the following records:


  • Financial records of its licensed activities in Ontario;
  • Every agreement that the Mortgage Administrator enters into while administering mortgages; and
  • All documents/written information that are given to/obtained from lenders and investors.

15. What requirements does a Mortgage Administrator need to meet if it receives trust money?

A Mortgage Administrator that receives trust money must: 


  • Notify FSCO’s Licensing & Registration Analysis Unit in writing within five days, if it is required to establish a trust account;
  • Hold deemed trust funds in a trust account;  
  • Maintain a trust account in a bank, credit union, or loan and trust company in Ontario;
  • Deposit trust funds within two business days;
  • Keep trust funds separate from other funds;
  • Pay any interest earned to the beneficial owner, unless otherwise agreed upon in writing;
  • Disburse trust funds according to the terms under which the funds were received;
  • Keep records of transactions related to trust funds;
  • Prepare a monthly reconciliation statement for the trust account;
  • Immediately notify FSCO in writing if there are any shortfalls in the trust account; and
  • Prepare an annual trust account reconciliation within 90 days of the Mortgage Administrator’s fiscal year end. 

16. Do Mortgage Administrators need to meet any new business requirements on July 1, 2008?

Starting July 1, 2008, each Mortgage Administrator is required to:


  • Maintain errors and omissions insurance which includes coverage for fraud;
  • Provide a written response to a written complaint, and advise individuals/businesses that they may refer their complaints to FSCO; and
  • Provide its name and licence number upon request, to anyone who asks for it.

17. What activities/practices are prohibited effective July 1, 2008?

Starting July 1, 2008, Mortgage Administrators are prohibited from the following activities/practices:


  • Using an unauthorized name. You can only use the name in which you are licensed.
  • Indicating that Mortgage Administrator fees are approved by the government. – You cannot claim that Mortgage Administrator fees are approved by a government authority. The only exceptions are fees under the Land Titles Act or the Registry Act.
  • Offering guarantees to lenders/investors. – You cannot offer a guarantee to a lender/investor regarding a mortgage loan or mortgage investment.
  • Engaging in tied selling. – Lenders/investors cannot be required to obtain a product/service as a condition for obtaining another product/service from the Mortgage Brokerage or Administrator.

 
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