October 2, 2014 - Issue 25
The product suitability review was used to gather information for the Mortgage Broker Regulators' Council of Canada (MBRCC) and participating member regulators, including the Financial Services Commission of Ontario (FSCO). Ontario, Alberta and Newfoundland & Labrador participated in the review. It provided an understanding of the processes and practices mortgage brokers and agents use during new residential mortgage transactions to determine suitable mortgage options for clients.
Mortgage Brokering Product Suitability Report
MBRCC prepared a report outlining the findings:
- most mortgage brokers direct their residential clients to suitable mortgages by engaging in detailed fact finding and needs assessments and providing relevant recommendations and disclosures
- less than half of Ontario mortgage brokers and agents indicated that mortgage brokering is their primary source of income
- 66 per cent of Ontario mortgage brokers and agents say they typically represent both the borrower and the lender
- 68 per cent of mortgage brokers indicated that their mortgage brokering activities are in writing. In Ontario:
- 77 per cent disclose compensation in writing as required by law
- 80 per cent disclose potential or actual conflicts of interest in writing as required by law
- 86 per cent of Ontario mortgage brokers and agents indicated that they always assess their clients’ level of financial literacy.
Results from the review provide information to MBRCC and the mortgage brokering industry in order to promote industry benchmark practices for assessing mortgage suitability and proper disclosure during the mortgage brokering process.
What you can do
You can assess yourself against the aggregate results in the report to evaluate your own practices and identify areas for improvement.
As a mortgage broker or agent you:
What FSCO may do
The Superintendent of Financial Services requires all mortgage brokers and agents to comply with the law at all times. Conducting activities consistent with industry benchmark practices is one way to ensure that you are following the law. FSCO may conduct:
- follow-up mortgage broker and agents questionnaires
- additional on-site file reviews with mortgage brokers or agents to assess their compliance with disclosure requirements
- additional on-site compliance reviews with mortgage brokerages to assess if obligations regarding supervision of brokers/agents are met under the law (section 40 of Ontario Regulation 188/08)
Mandatory Completion of Questionnaire
Ontario mortgage brokers and agents selected to complete the questionnaire were notified by email on January 17, 2014 and were required to complete the questionnaire by February 19, 2014 pursuant to section 29 of the Mortgage Brokerages, Lenders and Administrators Act . Because there was only an 87 per cent response rate to the questionnaire, FSCO reopened it for an additional two weeks, resulting in a 95 per cent response rate.
Mortgage brokers and agents who did not respond failed to comply with a statutory request from the Superintendent. Regulatory action is being taken against those mortgage brokers and agents that were in non-compliance.