Amendments to Ontario Regulations 187/08, 188/08 and 189/08 Took Effect on January 1, 2016

Mortgage fraud is a growing problem that is estimated to cost hundreds of millions of dollars in Canada each year. In a continued effort to combat mortgage fraud and raise awareness of this important issue, the Government of Ontario made amendments to three existing regulations under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA): 


These changes were made in response to the Report to the Minister on the Five-Year Review of the MBLAA [New Window]. The updated regulations came into effect on January 1, 2016. A summary of the changes that have been made to these standards of practice regulations are provided below. As of January 1, 2016, all mortgage brokerages, administrators, brokers and agents must be compliant with these regulations as amended.

 

Summary of Changes to the Standards of Practice Regulations

 

  • Mortgage brokerages, administrators, brokers and agents are prohibited from acting, or doing anything, or failing to do anything, in circumstances where they ought to know that they are being used to facilitate fraud, dishonesty, crime or illegal conduct. (This is required under section 14.2 of Ontario Regulation 188/08, section 10.1 of Ontario Regulation 189/08 and section 3.1 of Ontario Regulation 187/08.)
  • Brokerages are prohibited from acting as a representative of a borrower, lender or investor if the brokerage has "reason to doubt" that the mortgage, its renewal, or the investment in it is lawful. (This is required under section 12 of Ontario Regulation 188/08.) Similarly, mortgage administrators are prohibited from administering a mortgage if they have "reason to doubt" that the mortgage, its renewal, or the investment in it is lawful. (This is required under section 10 of Ontario Regulation 189/08.)
  • Brokerages are required to take reasonable steps to verify a borrower's legal authority to mortgage a property. (This is required under section 13 of Ontario Regulation 188/08.)
  • The brokerage's duty to inform the lender if they have to reason to doubt the accuracy of a borrower's application or a borrower's legal authority to mortgage a property will continue after the borrower enters into a mortgage agreement.  (This is required under section 14.1 of Ontario Regulation 188/08.)
  • The requirement to disclose conflicts of interest was amended to replace "any conflict of interest" with "any conflict of interest or potential conflict of interest."  (This is required under sub-sections 27(1) and 40(3)5 of Ontario Regulation 188/08.)
  • The principal amount in the requirement concerning advance payment by a borrower has been amended to $400,000 or less. (This is required under sub-section 37(1) of Ontario Regulation 188/08.)
  • Policies and procedures on fraud prevention have been added to the topics that must be covered in a brokerage's written policies and procedures. (This is required under subsection 40(3)(8) of Ontario Regulation 188/08.)

 
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