How Can Mortgage Professionals Ensure They Are Meeting Disclosure Requirements

General
Forms
Disclosure to Borrowers
Disclosure to Borrowers and Lenders
Disclosure to Lenders and Investors
Other Questions

Full general

1. When do the new disclosure requirements go into effect?
2. How will FSCO ensure that each Mortgage Brokerage is requiring its Mortgage Agents to follow the new rules and regulations under the Mortgage Brokerages, Lenders and Administrators Act, 2006?

Forms

3. Does FSCO take a standard form or sample wording for disclosing risks for typical residential mortgages?
4. Does FSCO have a standard form for disclosing the toll of borrowing?
5. Does FSCO have whatever disclosure forms other than the Statement of Mortgage Form?
6. Can my Mortgage Brokerage use its own Argument of Mortgage Course?
7. In the webinar presentation, FSCO says "the manufacture" is creating a new disclosure course. Who is "the industry"?
8. The cost of borrowing is disclosed in the current Statement of Mortgage Form. Does this run across the disclosure requirement for the cost of borrowing?

Disclosure to Borrowers

9. Do I need to provide written disclosure of material risks for each borrower?
10. How do I disclose to a borrower that selecting a longer amortization in a declining market may take a negative bear upon if he/she defaults on the mortgage?
11. Is it a conflict of involvement for a mortgage amanuensis to too be an insurance agent or real estate agent?
12. Can a consulting fee be charged?
13. If a borrower needs to have his/her "eyes wide open" going into a mortgage, are standard charge terms (STCs) adequate?
14. If I co-banker a mortgage with another Mortgage Broker, who has the responsibility of providing disclosure and forms to the client?
15. How do I know which mortgage term is suitable for my client?
16. What steps should I have to verify a borrower's identity, if the borrower was institute over the Internet and is located quite far from the Mortgage Brokerage?

Disclosure to Borrowers and Lenders

17. What is the Mortgage Brokerage's liability in respect to borrowers and lenders? Is this covered by errors and omissions insurance?
18. Practise I need to provide disclosure and suitability risks to a sophisticated borrower or lender? (e.g. a Mortgage Broker is interim on a $x 1000000 commercial loan application for a borrower who is a programmer.)

Disclosure to Lenders and Investors

19. What types of lenders and investors do not need to take disclosure provided to them?
20. Exercise I need to disembalm to an investor that a mortgage may non always be a practiced investment?
21. How can I determine if a mortgage is suitable for a individual investor?

Other Questions

22. Do banks need to meet the same compliance rules as Mortgage Brokerages?
23. Why are Mortgage Brokerages not required to written report mortgages in FINTRAC?
24. How do I disclose the exact corporeality of a lawyer'due south fee?
25. Who can referral fees be paid to?
26. Are my duties unlike for opposite mortgages, in comparing to standard mortgages?
27. Are the disclosure requirements for commercial property lending the same as those for residential unmarried family backdrop?
28. Can Mortgage Brokers engage in leasing activities? If and then, is leasing governed by the Mortgage Brokerages, Lenders and Administrators Human action, 2006?
29. How will FSCO enforce the disclosure and suitability of risks for large Mortgage Brokerages who are owned by, or associated with banks?

General

ane. When do the new disclosure requirements become into effect?

The new disclosure requirements under Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Do (sections 18, xix, 21 – 23, 25 and 27) and Ontario Regulation 189/08 - Mortgage Administrators: Standards of Exercise (sections 15 – 17 and nineteen – twenty) go into effect on January 1, 2009.

ii. How will FSCO ensure that each Mortgage Brokerage is requiring its Mortgage Agents to follow the new rules and regulations under the Mortgage Brokerages, Lenders and Administrators Act, 2006?

The Principal Banker is responsible for the conduct of the Mortgage Brokerage'due south Brokers and Agents as the Chief Compliance Officeholder. FSCO relies on the Principal Broker to ensure compliance under the Mortgage Brokerages, Lenders and Administrators Human activity, 2006 (MBLAA). FSCO may hold the Principal Broker and Mortgage Brokerage or Administrator answerable for the conduct of a Broker or Agent.

FSCO follows a risk-based arroyo to regulating all licensed Mortgage Brokerages and Administrators. FSCO assesses risks of non-compliance by reviewing complaints from the public, Annual Data Returns from Mortgage Brokerages and Administrators, audited fiscal statements from Mortgage Administrators, visits to Brokerages, and responses to compliance questionnaires.

Forms

3. Does FSCO have a standard course or sample diction for disclosing risks for typical residential mortgages?

FSCO does not crave a standard course or standard wording for disclosing material risks for typical residential mortgages. Mortgage Brokerages have the flexibility to design their own forms, and develop their ain wording in compliance with section 25 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Do. A Mortgage Brokerage tin can develop its own form, or it may choose to utilise one of the Toll of Borrowing Disclosure Forms currently beingness adult by the Mortgage Brokerage industry associations and vendors.

iv. Does FSCO accept a standard form for disclosing the toll of borrowing?

FSCO does not crave a standard form for disclosing the cost of borrowing. Mortgage Brokerages have the flexibility to design their own forms in compliance with Ontario Regulation 191/08 – Cost of Borrowing and Disclosure to Borrowers. A Mortgage Brokerage can develop its own class, or it may cull to employ i of the Cost of Borrowing Disclosure Forms currently being developed by the Mortgage Brokerage industry associations and vendors.

5. Does FSCO take any disclosure forms other than the Statement of Mortgage Form?

The current Statement of Mortgage Form is constructive until December 31, 2008. Afterwards this engagement, it is up to each Mortgage Brokerage to provide borrowers with disclosure statements that incorporate the required information on the cost of borrowing. A Mortgage Brokerage can develop its own course, or it may cull to use the forms being adult by Mortgage Brokerage industry associations and vendors.

The current Renewal Class and Investor/Lender Disclosure Argument for Brokered Transactions can proceed to be used. Mortgage Brokerages and Administrators may notice the existing forms on FSCO'due south website until new forms become available in 2009.

6. Can my Mortgage Brokerage use its ain Argument of Mortgage Form?

The current Statement of Mortgage Form is effective until December 31, 2008. After this date, Mortgage Brokerages can develop and use their ain forms, provided they comply with the regulations nether the Mortgage Brokerages, Lenders and Administrators Act, 2006. (Refer to section half dozen of Ontario Regulation 191/08 - Cost of Borrowing and Disclosure to Borrowers.) Mortgage Brokerage industry associations may also be able to assistance with the development of new cost of borrowing disclosure forms.

vii. In the webinar presentation, FSCO says "the manufacture" is creating a new disclosure form. Who is "the industry"?

Disclosure forms are beingness developed by Mortgage Brokerage industry associations: the Canadian Association of Accredited Mortgage Professionals and the Independent Mortgage Brokers Association, too as service providers: Filogix and Marlborough Stirling Canada.

8. The cost of borrowing is disclosed in the current Statement of Mortgage Course. Does this meet the disclosure requirement for the cost of borrowing?

The current Argument of Mortgage Grade is effective until Dec 31, 2008. Afterwards this engagement, a Mortgage Brokerage may apply its own price of borrowing statement, provided information technology complies with the regulations that go into effect on January 1, 2009. If you demand assistance in developing a cost of borrowing disclosure statement, run into department 6 of Ontario Regulation 191/08 - Price of Borrowing and Disclosure to Borrowers. Mortgage Brokerage industry associations may also be able to assist with the development of new forms.

Disclosure to Borrowers

nine. Practice I need to provide written disclosure of material risks for each borrower?

Mortgage Brokerages are required to provide written disclosure of material risks of the mortgage to each borrower. The Mortgage Brokerage is as well required to obtain written acknowledgement from each borrower that this disclosure has been provided. (See section 25 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice.)

10. How do I disclose to a borrower that selecting a longer amortization in a declining marketplace may have a negative touch on if he/she defaults on the mortgage?

The Mortgage Brokerage is required to disembalm in writing the material risks of the mortgage and obtain written acknowledgement of receipt from the borrower. (Run across section 25 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice.) The Mortgage Brokerage too has a duty to ensure the mortgage is suitable for the borrower, having regard to his/her needs and circumstances. (Come across section 24 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice.) If you have additional concerns, speak to your Principal Broker.

11. Is it a conflict of interest for a mortgage amanuensis to as well be an insurance agent or existent estate amanuensis?

A licensed insurance amanuensis or real estate agent can besides be licensed every bit a mortgage agent or banker providing that their mortgage activities do not jeopardize their integrity, independence or competence as an insurance agent or real estate agent, or vice versa.

Agents should contact their employers or sponsors to determine if the corporate policies of the mortgage brokerage could restrict their power to concur other employment.

12. Tin can a consulting fee be charged?

Any fees that are payable to the Mortgage Brokerage for its services must exist disclosed and included in the Cost of Borrowing Disclosure. In addition, in cases where the master amount of the mortgage is $300,000 or less, the Mortgage Brokerage cannot take an advance payment or deposit, or require a borrower to make an advance payment or eolith, for services to be rendered or expenses to be incurred past the Mortgage Brokerage or any other person. For more details, refer to section 37 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice.

xiii. If a borrower needs to have his/her "optics broad open" going into a mortgage, are standard charge terms (STCs) adequate?

The standard charge terms (STCs) that specify the terms and weather condition of a mortgage, and act as the contract between the lender and the borrower are not sufficient. Refer to sections 18 – 36 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice for the Mortgage Brokerage'south disclosure requirements. For cost of borrowing disclosure requirements, refer to Ontario Regulation 191/08 - Price of Borrowing and Disclosure to Borrowers.

14. If I co-banker a mortgage with some other Mortgage Broker, who has the responsibility of providing disclosure and forms to the client?

If a mortgage is co-brokered, both Mortgage Brokers are responsible for providing the customer the required disclosure, and for maintaining mortgage files for the required period of time. If agreed upon, these responsibilities tin can be delegated to ane of the Mortgage Brokers. Nonetheless, all required disclosures and forms must be maintained by both Mortgage Brokers.

15. How do I know which mortgage term is suitable for my client?

Advising a client involves giving your professional opinion. Equally a regulator, FSCO will not tell you what to recommend to a client. However, the general principles include:

• Asking your client questions to understand his/her financial situation and future plans;
• Ensuring that the mortgage does not expose your client to undue risk; and
• Making certain that the mortgage is suitable for your client.

16. What steps should I accept to verify a borrower'southward identity, if the borrower was found over the Internet and is located quite far from the Mortgage Brokerage?

Credit reporting agencies and other companies offer services to help verify the identities of potential clients found through the Internet.

Other possibilities include request for a alphabetic character of introduction from a local lawyer, calling the lawyer to confirm the letter, and checking the lawyer's proper name, address and phone number with the Law Society of Upper Canada. Yous may also want to conduct reverse telephone and accost checks on telephone directory websites, to encounter if the names lucifer the addresses and telephone numbers. Sections 10 and eleven of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practise require that you take reasonable steps to verify the borrower's identity. Work with your Principal Broker to determine what is reasonable in this example.

Disclosure to Borrowers and Lenders

17. What is the Mortgage Brokerage's liability in respect to borrowers and lenders? Is this covered by errors and omissions insurance?

Civil liability is ultimately decided by the court if a claim is made for professional person negligence. The courts will consider the specific facts of each case. The Mortgage Brokerage'due south errors and omissions insurance policy is designed to provide liability coverage, just like all insurance policies, there are limits and exclusions.

eighteen. Do I need to provide disclosure and suitability risks to a sophisticated borrower or lender? (e.thousand. a Mortgage Broker is interim on a $10 1000000 commercial loan application for a borrower who is a developer.)

In this example, the borrower/customer appears to be a business corporation, and thus falls under the "designated classes of lenders and investors" (as defined in department 2 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Do), which exercise non take the same disclosure requirements as other clients (such as those purchasing single family backdrop). In addition, the requirements in Ontario Regulation 191/08 - Cost of Borrowing and Disclosure to Borrowers do not employ to a borrower that is not an actual person (such as a business corporation), or a borrower who enters into a mortgage for business purposes.

Disclosure to Lenders and Investors

19. What types of lenders and investors do non demand to have disclosure provided to them?

According to section 2(1) of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice, there are sure lenders and investors that the regulation calls "designated classes of lenders and investors" that practice not need disclosure provided to them. This includes a Mortgage Brokerage acting on its own behalf, a financial establishment, and an private who alone or with his/her spouse has internet avails of at to the lowest degree $five million, and provides written confirmation of this to the Brokerage. For a complete listing of "designated classes of lenders and investors", refer to Regulation 188/08.

20. Do I demand to disclose to an investor that a mortgage may not e'er exist a proficient investment?

Each Mortgage Brokerage has a duty to ensure that a mortgage investment is suitable for the potential investor, having regard to the investor's needs and circumstances. The Mortgage Brokerage is also required to disclose material risks of the mortgage investment in writing to the potential investor. For more details, please refer to section 25 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice. Please note that this requirement does not apply for "designated classes of lenders and investors" (see section two of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice).

21. How tin can I determine if a mortgage is suitable for a private investor?

To determine if a mortgage is suitable for a private investor:

• Enquire your client questions to find out his/her needs and circumstances;
• Recall about what makes a mortgage investment suitable for that client;
• A suitable mortgage investment does not betrayal the investor to undue risk;
• Ask yourself if the mortgage fits the investor's risk tolerance;
• Empathise the range of products that are available to y'all for your client.

Other Questions

22. Do banks need to meet the aforementioned compliance rules as Mortgage Brokerages?

Banks are subject to federal regulation and are exempt from licensing under the Mortgage Brokerages, Lenders and Administrators Deed, 2006 (MBLAA).

23. Why are Mortgage Brokerages non required to report mortgages in FINTRAC?

Mortgage Brokerages are not on the list of businesses that must written report suspicious transactions and other specific types of transactions to the Fiscal Transactions and Reports Assay Centre of Canada (FINTRAC). However, Real Estate Brokers, Existent Manor Sales Representatives, and certain Real Estate Developers are required to report transactions in FINTRAC. For more information, visit FINTRAC'due south website.

24.How practice I disclose the exact amount of a lawyer's fee?

Mortgage Brokerages, Brokers and Agents do not need to disclose the exact amount of a lawyer'due south fee. If you are providing an gauge, or information based on an assumption, indicate that the information is based on an estimate or assumption.

25. Who can referral fees be paid to?

A referral fee for a "simple referral" –- which is a referral where just contact information is provided to a potential borrower, lender or investor –- may be paid to individuals and businesses who are not licensed as Mortgage Brokerages. (Come across sections ane and 2 of Ontario Regulation 407/07 - Exemptions from the Requirements to be Licensed.)

Referral fees for "elementary referrals", as well as referrals that involve more than providing contact information, may be paid to licensed Mortgage Brokerages that refer mortgage business to other Mortgage Brokerages. Referral fees cannot be paid directly to Mortgage Brokers or Agents. They must be paid to the Mortgage Brokerage and be fully disclosed in writing to the borrower, lender or investor.

26. Are my duties different for reverse mortgages, in comparison to standard mortgages?

A Mortgage Brokerage cannot arrange or enter into a reverse mortgage with a borrower, unless the borrower provides a written statement signed by a lawyer. The written statement needs to say that the lawyer has provided the borrower independent legal advice almost the proposed reverse mortgage. (For more data see department 29 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice.) This is in addition to the duty to ensure suitability based on the client's needs and circumstances, and to disembalm cloth risks that apply to other mortgages. Mortgage Brokerages, Brokers and Agents are responsible for fully understanding the mortgage products they offer to their clients.

27. Are the disclosure requirements for commercial property lending the same as those for residential single family unit properties?

Clients that autumn nether the "designated classes of lenders and investors" (equally defined in section 2(1) of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice) do not accept the same disclosure requirements as other clients (such as those purchasing single family properties). In addition, the requirements in Ontario Regulation 191/08 - Toll of Borrowing and Disclosure to Borrowers do not apply to a borrower that is not an actual person (such equally a concern corporation), or a borrower who enters into a mortgage for concern purposes.

28. Can Mortgage Brokers engage in leasing activities? If so, is leasing governed by the Mortgage Brokerages, Lenders and Administrators Act, 2006?

Mortgage Brokers can appoint in leasing activities. Leasing is not governed past the Mortgage Brokerages, Lenders and Administrators Human activity, 2006. If a Mortgage Broker is engaged in another business organization, the Mortgage Brokerage should ensure the other business does not jeopardize the Mortgage Brokerage's integrity, independence or competence. The Mortgage Brokerage should likewise non utilise any information that is obtained while conveying on business organisation for any other purpose, without the written consent of the person who is the subject area of the information. (See sections 56 and 57 of Ontario Regulation 188/08 - Mortgage Brokerages: Standards of Practice.)

28. How will FSCO enforce the disclosure and suitability of risks for large Mortgage Brokerages who are owned by, or associated with banks?

A licensed Mortgage Brokerage that is owned or associated with a banking concern is required to comply with the Mortgage Brokerages, Lenders and Administrators Act, 2006 and regulations.

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Source: https://www.fsco.gov.on.ca/en/mortgage/Pages/DSRBLI.aspx

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