Mortgage Brokering – News you need, volume 7

In this issue

• Welcome
• Supervising the mortgage broker sector
• FSRA to engage more closely with large brokerages after concerns identified
• Better supervision and oversight needed for brokering and administering mortgage investments
• Promissory notes may be securities regulated by the Ontario Securities Commission: What you need to know
• Don’t overpromise in your mortgage investment advertisements
• Your responsibilities when renewing mortgages
• Are your mortgage investment disclosures adequate to protect borrowers and investors?
• Thank you for a successful renewal season!
• Be careful, you could be conducting unlicensed activity
• Stay in the loop

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As mortgage professionals, it’s important you ensure that consumers receive products and advice that meets their needs, especially given current economic uncertainties.

We are navigating an environment marked by interest rate and market uncertainty, which could affect mortgage affordability. This may result in a consumer expectations gap where consumers think mortgage affordability will improve faster than it does in reality.

In this environment, it’s more important than ever to protect consumers by doing appropriate due diligence, providing all required disclosures and thoroughly documenting your suitability assessments.

Brokerages should also implement the right supervision processes and controls. These measures will help enhance consumer confidence in the sector and ensure consumers are treated fairly.

Consumers who invest in private mortgages also stand to be impacted in this environment. These types of mortgage investments are riskier because there is higher probability that borrowers might not be able to repay when the mortgage matures. If you are working with these investments, you may also need to follow all relevant securities regulation.

To help you better understand your responsibilities, this edition of the MB Newsletter features articles explaining your regulatory obligations, how to protect your clients and ensure high standards of business conduct.

Be sure to also check out our new Supervision Plan and final licensing and product suitability guidance.

As always, thank you for your continued efforts in ensuring a safe, strong and vibrant financial services market in Ontario.

If you have questions about our supervision plan, newsletter or other publications, please contact the Mortgage Brokering Conduct team at [email protected].

Antoinette Leung
Head, Financial Institutions and Mortgage Brokerage Conduct

We are releasing our annual Mortgage Brokering Sector Supervision Plan which will help ensure that brokerages and principal brokers have in place a strong conduct culture that supports fair treatment of consumers; consumers receive mortgage advice and products suitable for their individual needs and circumstances, especially with regard to private mortgages; and investors and lenders have confidence that mortgage administrators are appropriately handling and protecting investments in administrators’ care.

Learn more about our new Supervision Plan.

FSRA will engage more closely with large brokerages to ensure they are protecting consumers by effectively supervising agents and brokers. FSRA is taking this step following recent reviews that found overall inadequacies in brokerages’ supervision and compliance controls.

Learn more about our findings.

Licensed mortgage brokerages and related administrators have shown deficiencies in their business practices pertaining to private mortgage investments. These are the findings from a FSRA review focused on private mortgage transactions to better protect mortgage investors.

Learn more about what this means for you.

Mortgage brokerages, agents and brokers offering promissory notes to their clients must follow all applicable laws, including securities law requirements.

Learn more about promissory notes.

FSRA has noticed a growing number of misleading and overly optimistic advertisements soliciting investors’ funds to invest in mortgages. We remind mortgage professionals that advertising must be accurate, clear and avoid making misleading claims.

Learn more about what is and isn’t allowed in advertising.

FSRA views mortgage renewals as new and distinct transactions, which are different than simple extensions of existing contracts and terms. This means you must do the appropriate due diligence, assess suitability more thoroughly and make full disclosures to keep your clients and your business safe.

Learn more about your responsibilities when renewing mortgages.

FSRA has identified a concerning trend where commitment letters sometimes lack a lender name, or the name is listed as “TBD.” To protect borrowers and investors, mortgage professionals should provide appropriate disclosures about each party’s role in a mortgage transaction or investment. That includes identifying the lender in commitment letters.

Learn more about making appropriate disclosures.

We want to take a moment to acknowledge your efforts and patience this past renewal season and remind you about how your continuing education (CE) requirements are changing.

Learn more about the new Continuing Education requirements.

FSRA has found that some mortgage brokerages are conducting activities that require a mortgage administrator licence. To adequately manage the expectations of the lender and investors that are planning to administer their own mortgage, brokerages, brokers and agents should clearly describe their role in the transaction; and explain the activities required from lenders/investors servicing their own loans.

Learn more about staying compliant.