Disclosure of Potential Conflicts of Interest

General
Forms
Disclosure to Borrowers
Disclosure to Borrowers and Lenders
Disclosure to Borrowers and Investors
Banks

 

General

      1. When does the deadline for disclosures go into effect?
      2. What is a "business day"?
      3. Can Mortgage Brokerages, Brokers and Agents accept faxed or photocopied documents or agreements?
      4. Can disclosure be provided electronically (by e-mail or fax)?
      5. Does a written disclosure need to be signed at least two days before a mortgage commitment?  Or can it be provided and then signed at the same time as the mortgage commitment?
      6. Where can a Mortgage Broker/Agent obtain information on the percentage/number of deals the Mortgage Brokerage had with different lenders?
      7. Are FSCO’s webinar presentations available in print format?
      8. Who does the 50 per cent disclosure rule relate to?
      9. If a Mortgage Brokerage arranged over 50 per cent of mortgages or mortgage renewals with one lender, is the percentage of deals based on the number of deals or the dollar amount?
      10. What law requires Mortgage Brokers to disclose the specific amount of their fees?     

Forms  

      1. Can I ask FSCO to review my Mortgage Brokerage’s conflict of interest letter?
      2. Can I use the old Statement of Mortgage Form to disclose information?
      3. Are disclosure of roles set out in the new Statement of Mortgage Form? If not, how do roles need to be disclosed?
      4. Does FSCO have an application or document that Mortgage Brokerages can use to determine if they have provided all necessary disclosure requirements?
      5. Does FSCO have sample text or forms for disclosures (e.g. disclosure of fees or conflicts of interest)?
         

    Disclosure to Borrowers

        1. What is the brokerage required to disclose to the borrower concerning the cost of borrowing?
        2. Does a Mortgage Brokerage need to disclose in writing if it is limiting a Mortgage Agent’s ability to submit specific transactions in Filogix?
        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?
        4. Is a Principal Broker or Mortgage Broker/Agent allowed to lend his/her own money to a borrower through the Mortgage Brokerage?
        5. 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?
        6. If a Mortgage Brokerage only provides referrals to other Mortgage Brokerages, who needs to make the disclosure?
        7. If two different lenders provide the exact same mortgage loan (e.g. same rate, terms and conditions etc.), is it a conflict of interest to select the lender that provides a higher fee or remuneration?
        8. How far in advance can a client sign a disclosure document?
        9. What can be done if a Mortgage Brokerage cannot provide disclosure at least two business days ahead of time?
        10. If a Mortgage Agent has a family member that works for a lender, does this relationship need to be disclosed to a client?
        11. 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?
        12. Is a lender’s volume rebate a conflict of interest?
           

      Disclosure to Borrowers and Lenders

          1. 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?
          2. Who does a Mortgage Brokerage/Broker/Agent represent, if compensated by the lender?
          3. How should disclosure be made to lenders?
              

        Disclosure to Borrowers and Investors

            1. How is a borrower/investor supposed to know if a Mortgage Broker/Agent is lying about being unbiased when searching for mortgages?
                

          Banks

              1. What disclosure do I need to provide to a bank, if the client applied for a standard mortgage and no Mortgage Brokerage is being charged?
              2. If a bank’s mortgage representative works at a real estate office, does he or she need to disclose a conflict of interest?
              3. Do banks need to disclose the same information as Mortgage Brokerages to clients?

           

          General

            1. When does the deadline for disclosures go into effect?
             
            Starting January 1, 2009, all borrowers, lenders and investors must be provided disclosure at least two business days before the events described in sections 35 and 36 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice.
             
             
            2. What is a "business day"?
             
            A "business day" is any day that is not a Saturday or a "holiday". "Holidays" are defined in section 87 of the Legislation Act, 2006 and include Sundays and several statutory holidays.
             
             
            3. Can Mortgage Brokerages, Brokers and Agents accept faxed or photocopied documents or agreements?
             
            Yes. Mortgage Brokerages, Brokers and Agents can accept electronic records, including faxed or photocopied documents or agreements.
             
             
            4. Can disclosure be provided electronically (by e-mail or fax)?
             
            Yes. Disclosure can be provided electronically.
             
             
            5. Does a written disclosure need to be signed at least two days before a mortgage commitment? Or can it be provided and then signed at the same time as the mortgage commitment?
             
            The completed form (signed by a Mortgage Broker) must be provided. The borrower, lender or investor must sign to acknowledge receipt of the written disclosure at the time he/she receives it.
             
             
            6. Where can a Mortgage Broker/Agent obtain information on the percentage/number of deals the Mortgage Brokerage had with different lenders?
             
            The Principal Broker must be able to provide a Mortgage Broker/Agent information on the percentage/number of deals the Mortgage Brokerage had with different lenders during the past fiscal year.
             
             
            7. Are FSCO’s webinar presentations available in print format?
             
            Yes. FSCO’s webinar presentations are available online in print format.
             
             
            8. Who does the 50 per cent disclosure rule relate to?
             
            Upon request, a Mortgage Brokerage is required to disclose whether the Brokerage itself was the lender for more than 50 per cent of the total number of mortgages and mortgage renewals completed during the previous fiscal year. The Mortgage Brokerage is also required to disclose upon request, the name of the lender, if any, with whom the Brokerage arranged more than 50 per cent of the total number of mortgages and mortgage renewals during the previous fiscal year. 
             
             
            9. If a Mortgage Brokerage arranged over 50 per cent of mortgages or mortgage renewals with one lender, is the percentage of deals based on the number of deals or the dollar amount?
             
            It is based on the total number of mortgages and mortgage renewals.
             
             
            10. What law requires Mortgage Brokers to disclose the specific amount of their fees?
             
            Sections 21 and 22 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice require Mortgage Brokerages to disclose the fees, remuneration, reward points, incentives and other benefits that are payable by others to a Mortgage Brokerage, its Brokers and Agents, and that are payable to others by the Brokerage. This disclosure requirement includes the identity of the payer, and applies to any incentives that are received by a Mortgage Broker or Agent. Specific dollar amounts do not need to be disclosed, unless required by section 5 of Ontario Regulation 191/08 - Cost of Borrowing and Disclosure to Borrowers.

          Forms

             
            11. Can I ask FSCO to review my Mortgage Brokerage’s conflict of interest letter?
             
            FSCO does not provide opinions or advice about documents created by Mortgage Brokerages. Mortgage Brokerages may wish to consult a professional mortgage association or obtain legal advice. 
             
            12. Can I use the old Statement of Mortgage Form to disclose information?
             
            The Statement of Mortgage Form is only applicable until December 31, 2008. After this date, Ontario Regulation 191/08 – Cost of Borrowing and Disclosure to Borrowers, which has additional disclosure requirements, comes into effect. The old Statement of Mortgage Form would require significant modification to be suitable. Mortgage Brokerage industry service providers are currently developing new cost of borrowing disclosure statements. You may want to contact them about the forms.
             
             
            13. Are disclosure of roles set out in the new Statement of Mortgage Form? If not, how do roles need to be disclosed?
             
            After January 1, 2009, FSCO will no longer have a Statement of Mortgage Form. To learn how roles need to be disclosed under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA), refer to section 18 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice. It requires written disclosure of information to a prospective borrower, about whether/when the Mortgage Brokerage is acting for the borrower, the lender, or acting for both and not giving preference to either.
             
             
            14. Does FSCO have an application or document that Mortgage Brokerages can use to determine if they have provided all necessary disclosure requirements?
             
            It is the responsibility of the Mortgage Brokerage and Principal Broker to have policies and procedures that ensure all the necessary disclosures have been made.
             
             
            15. Does FSCO have sample text or forms for disclosures (e.g. disclosure of fees or conflicts of interest)?
             
            FSCO does not have sample text or forms for disclosures. Disclosure statements need to be developed by each Mortgage Brokerage. You may want to contact the Canadian Association of Accredited Mortgage Professionals (CAAMP), the Independent Mortgage Brokers Association (IMBA), and vendors who supply software to the Mortgage Brokerage industry, to find out if they are developing forms on conflicts of interest and disclosure. 

           

          Disclosure to Borrowers

            16. What is the brokerage required to disclose to the borrower concerning the cost of borrowing?
             
            There isn’t a standard form. It is up to the Mortgage Brokerage and Principal Broker to ensure that policies and procedures are in place, and to make sure Mortgage Brokers and Agents provide full disclosure of their relationships, fees and potential conflicts of interest.
             
             
            17. Does a Mortgage Brokerage need to disclose in writing if it is limiting a Mortgage Agent’s ability to submit specific transactions in Filogix?
             
            The Mortgage Brokerage is required to disclose in writing to a borrower the number of lenders on whose behalf the Brokerage acted as a representative during the past fiscal year. Upon request, the Mortgage Brokerage is required to disclose the name of the lender, if any, with whom the Brokerage arranged more than 50 per cent of the total number of mortgages completed during the previous fiscal year.
             
             
            18. 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 disclosure duty with respect to a Mortgage Brokerage’s relationships is that of the Mortgage Brokerage that is presenting a mortgage for consideration.
             
             
            19. Is a Principal Broker or Mortgage Broker/Agent allowed to lend his/her own money to a borrower through the Mortgage Brokerage? 
             
            A Principal Broker, Mortgage Broker or Agent may lend his/her own money (i.e. act as a lender) through a Mortgage Brokerage. 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.
             
             
            20. 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 are required to disclose the material risks of the mortgage, your Mortgage Brokerage’s role, and any potential conflicts of interest. 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.
             
             
            21. 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. 
             
             
            22. If two different lenders provide the exact same mortgage loan (e.g. same rate, terms and conditions etc.), is it a conflict of interest to select the lender that provides a higher fee or remuneration?
             
            If both options benefit the borrower equally, and a full written disclosure has been provided, the requirements of the Mortgage Brokerages, Lenders and Administrators Act, 2006 have been satisfied.
             
             
            23. How far in advance can a client sign a disclosure document?
             
            Unless the context requires otherwise, 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.
             
             
            24. 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.
             
             
            25. 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.
             
            26. 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 fulfill the disclosure requirements about its relationship and its role in the transaction.
             
             
            27. Is a lender’s volume rebate a conflict of interest?
             
            A lender’s volume rebate may create the appearance that business is being placed to take advantage of the rebate. Mortgage Brokerages must disclose the existence of incentives that might appear to influence the Brokerage and its Mortgage Brokers and Agents to put their own interests ahead of the client’s. If in doubt, disclose. In its written disclosure, a Mortgage Brokerage must disclose the nature of its relationships and if it may/will receive fees/benefits from other individuals/companies.

           

          Disclosure to Borrowers and Lenders

            28. 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.
             
             
            29. Who does a Mortgage Brokerage/Broker/Agent represent, if compensated by the lender?
             
            It is up to the Mortgage Brokerage to determine who its client is and to disclose its role. The Mortgage Brokerage is required to disclose whether it is acting as a representative of:
            the lender, but not the borrower;
            the borrower, but not the lender; or
            both the borrower and the lender, and is not giving preference to the interests of either.
             
             
            30. 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.

           

          Disclosure to Borrowers and Investors

            31. 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.

           

          Banks

            32. What disclosure do I need to provide to a bank, if the client applied for a standard mortgage and no Mortgage Brokerage is being charged?
             
            Banks and other financial institutions are specifically exempt from the requirements under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA) to provide disclosure to lenders and investors. You can ask the bank for its requirements.
             
             
             33. If a bank’s mortgage representative works at a real estate office, does he or she need to disclose a conflict of interest?
             
            If the representative is an employee of the bank, he or she is exempt from the requirements of the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA) and regulations if he or she deals or trades in mortgages on behalf of the financial institution. Banks are regulated by the federal government and have their own rules concerning disclosure. If the bank representative is working on commission or contract, and is not supervised by the bank, he or she may not be an employee of the bank. In this case the bank representative is required to be licensed to deal or trade in mortgages, and must comply with the MBLAA requirements, including conflict of interest disclosure requirements.
            Note - anyone dealing or trading in mortgages is required to be licensed, unless a specific exemption applies.
             
             
            34. Do banks need to disclose the same information as Mortgage Brokerages to clients?
             
            Banks are not governed by the Mortgage Brokerages, Lenders and Administrators Act, 2006. You may wish to contact the Financial Consumer Agency of Canada to learn about disclosure rules for banks.

           

           
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