Important Requirements for the Mortgage Broking Industry

​May 21, 2015 - Issue 26


This issue of the Mortgage Broker e-Info Newsletter focuses on informing the mortgage broking industry of their obligations under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA) and regulations, and provides helpful tips on complying with this legislation.


FSCO and MFDA Issue Joint Communication Concerning the Selling of Syndicated Mortgage Investments

The Mutual Fund Dealers Association (MFDA) and FSCO have issued a joint communication concerning mutual fund dealers that have salespeople who are also licensed as mortgage brokers or mortgage agents, and are selling syndicated mortgage investments. For more information, please see Bulletin #O628-P [New Window] Size: ## kb, which was issued on January 21, 2015.

Businesses that Promote Syndicated Mortgage Investments are Required to be Licensed

Recently, developers and marketers, not licensed under the MBLAA, have been promoting syndicated mortgage investments to investors and have made arrangements with mortgage brokerages to sell these investments. Under the MBLAA, businesses that promote or provide information about syndicated mortgage investments are required to be licensed as mortgage brokerages.
This applies even where the transaction is closed by a licensed mortgage brokerage, or where the unlicensed business promoting the investment is owned by a licensed mortgage broker or agent. Promoting or providing information includes activities such as: posting information on websites, holding informational seminars, participating at investor trade shows, and advertising on radio, television and in newspapers.
In spring 2015, FSCO plans to release a bulletin that will clarify its position on syndicated mortgages. This bulletin will also remind mortgage brokerages of the need to conduct their due diligence, to ensure investors understand the risks of syndicated mortgages, and that the product is suitable for the investor.

Updated Investor/Lender Disclosure Statement

FSCO’s Investor/Lender Disclosure Statement for Brokered Transactions is currently being reviewed to ensure there is sufficient and adequate disclosure to investors. The updated form is expected to be ready in spring 2015, when it will be posted on the Mortgage Brokering Forms web page.

Checklist on Detecting and Preventing Fraud

FSCO is working with the mortgage broking industry to develop a new checklist that will provide guidance and best practices for detecting and combating mortgage fraud. This new checklist will be an important fraud prevention tool for mortgage brokerages, administrators, brokers and agents. FSCO plans to have this checklist ready in summer 2015, when it will be posted on the FSCO website and sent to licensees by email.

FSCO's Audit of Mortgage Brokerages

FSCO utilizes a risk-based approach to regulation, which focuses on allocating valuable regulatory resources to those areas that are deemed to have the greatest risk. Under this regulatory approach, FSCO goes beyond just enforcing requirements that are set out in legislation. Instead of examining all risks, FSCO focuses its attention on those risks that have the potential to cause the greatest degree of harm. The benefit of this approach is that regulatory resources are maximized and compliance costs are minimized.
Under this regulatory approach, FSCO periodically conducts audits of mortgage brokerages, to ensure they are in compliance with the MBLAA.

Brokerages Must Have a Principal Broker

Under section 7(6) of the MBLAA, each mortgage brokerage must designate a principal broker. In addition, under section 1(1) of Ontario Regulation 410/07 the brokerage’s principal broker must have a valid mortgage broker’s licence.
Not meeting these requirements is a serious offence. A brokerage’s licence will be immediately suspended under section 17(1) of the MBLAA, if it does not have a designated principal broker who is licensed as a mortgage broker.
On April 30, 2014, FSCO reviewed its licensing database and determined that 97 brokerages did not have an active licensed principal broker.
Since then, FSCO has ensured that these brokerages renewed their principal brokers' licences, or surrendered their brokerages' licences. These activities reduced the number of non-compliant brokerages to 67. As these 67 brokerages were unresponsive to FSCO’s requests, FSCO took enforcement action.
As of February 20, 2015, the following activities have taken place:
  • FSCO has processed 21 applications for surrendering a mortgage brokerage licence;
  • 11 mortgage brokerages have renewed their principal broker's licence;
  • 33 mortgage brokerages have had their licences revoked; and
  • FSCO is in process of taking enforcement action against two mortgage brokerages.

Annual Information Returns

All mortgage brokerages and administrators are required to complete and submit an Annual Information Return (AIR) no later than March 31st each year. If you have not submitted your AIR yet, please do so immediately.
This annual reporting requirement is mandatory for all licensed mortgage brokerages and administrators under Ontario Regulation 193/08 and section 29 of the MBLAA.
Brokerages and administrators that failed to submit the AIR by March 31, 2015 may be required to pay an administrative monetary penalty (AMP) of $1,000. Non-compliance increases FSCO's regulatory costs and impacts the fees you pay.
Even if the brokerage/administrator did not do any business in 2014, it is still required by law to file the 2014 AIR.
For more information about filing an AIR, please refer to FSCO's web page and frequently asked questions on AIRs.

How to Surrender a Mortgage Broker or Agent Licence

If you are a licensed mortgage broker or agent in Ontario, and no longer wish to conduct mortgage broking business, you must complete the Application for the Surrender of a Mortgage Broker or Agent Licence, which is available on FSCO’s website.
You must complete this form, as it:
  • Notifies the Superintendent of Financial Services of your intention to surrender your mortgage broker or agent licence;
  • Will end your obligation to maintain certain mortgage broker or agent licence requirements (i.e. continuing education); and
  • Ensures that you have properly exited the mortgage broking business.
The Superintendent will allow the surrender of a mortgage broker or agent licence unless he believes that it is not in the public interest. The Superintendent may, in some instances, propose allowing the surrender, but impose conditions. If you disagree with those conditions, you will have an opportunity to request a hearing before the Financial Services Tribunal who will make the final decision.
Until the Superintendent approves your application for surrendering your licence, your mortgage broker or agent licence will remain valid. This means that you still have to adhere to all the obligations of having a licence until your application is approved.
For more information on how to surrender a mortgage broker or agent licence, please refer to FSCO's frequently asked questions.

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