Proposed enhanced mortgage brokering conduct standards to protect consumers

Purpose of consultation

The Financial Services Regulatory Authority of Ontario (FSRA) promotes high standards of business conduct and protection of the rights and interests of consumers.

In line with these goals, FSRA endorses the Code of Conduct (Code) for the mortgage brokering sector developed by the Mortgage Broker Regulators’ Council of Canada (MBRCC). FSRA expects mortgage professionals to adhere to the Code. Consumers of mortgage brokering services can use the Code to learn more about their rights and what appropriate service looks like.

FSRA sought industry and consumer feedback on a proposed approach to using the Code in its supervisory activities. We received 10 submissions on our Approach Guidance during the consultation period, from November 27, 2020 to January 21, 2021.

What we heard

FSRA thanks all commenters for their views. Based on the feedback, no substantive changes were required to our Approach Guidance. 
Feedback highlights include:

  • “Both [Canadian Mortgage Brokers Association Ontario (CMBA Ontario)] and [Mortgage Professionals Canada (MPC)] believe adoption of an industry wide code of conduct is worthwhile and would simplify our respective expected standards of practice and conduct for membership eligibility. Unifying our associations’ code with the regulator(s) also ensures we are each supporting publicly our respective activities ensuring consumer protections and adherence to the code.” [MPC and CMBA Ontario]
  • We fully agree with the purpose of the Code, which is to help ensure consumers are treated appropriately and fairly, and we applaud FSRA for proposing a simple, modern principles-based guidance approach. [Desjardins Group]
  • “Good direction.” [MQCC]
  • “Started out with having to sign one document known as a statement of mortgage. Now a book is written for every file. The codes of conduct you want to propose is only going to make the situation worse.” [Cirrius Finance Corp.]
  • “I think this is a FANTASTIC idea and very much needed for our industry.” [Clover Mortgage Inc.]

Our response

Effective August 5, 2021, FSRA’s licensing and supervisory activities incorporate the Code as per Approach Guidance No. MB0042APP. Based on industry and consumer consultation, there was strong support for this approach. 

List of contributors

The following stakeholders took the time to share their perspectives with FSRA:

  • Centum Dunlop Mortgages Inc.
  • Cirrius Finance Corp.
  • Clover Mortgage Inc.
  • Desjardins Group
  • First Financial Lending
  • I Finance Construction
  • Mortgage Professionals Canada and Canadian Mortgage Brokers Association Ontario
  • MQCC
  • RateShop Inc./Carte Financial Group

In addition, there was one anonymous submission.


Summarized Comment

FSRA Response

Support for Code

Most of the commenters indicated support for the Code and FSRA’s Guidance. Commenters noted:

  • Such a code would help consumers get the right advice.
  • It is a welcome measure to improve and strengthen compliance.
  • Support FSRA principles-based guidance.

FSRA thanks the stakeholders for their support.

Regulatory burden

One commenter expressed concern that having to consider the Code, in addition to other documentation required for a mortgage file, would impose additional regulatory burden. The commenter noted the cause of harms is intent, which cannot simply be addressed by a Code. 

The Code largely reflects and complements existing requirements under the Mortgage Brokerage, Lenders and Administrators Act, 2006 (MBLAA). It is a plain-language guide to help licensees comply with the MBLAA and its regulations and promotes regulatory compliance.

Regulator Enforcement

Industry associations do not have the ability to investigate breaches of the Code or regulatory requirements, impose conditions, suspend, or revoke licences under the MBLAA.
As such, associations would follow the decision of the regulator regarding any complaint investigated by the regulator:

  • If the regulator were to revoke or suspend an individual’s license, the associations would follow suit and revoke or suspend membership eligibility.
  • If the individual is permitted to retain their licence, they would also be permitted to retain their membership status with the associations.

FSRA expects that licensees should be the first point of contact, as appropriate, for consumer concerns.
FSRA reviews unresolved complaints submitted to FSRA about a licensee’s conduct against the Code. Where FSRA finds non-compliance with MBLAA resulting from non-compliance with the Code, FSRA acts to address it.

Enforcement actions include:

  • Warning or cautionary letters
  • Licence conditions, suspension, or revocation
  • Administrative monetary penalties
  • Court prosecution

Language to address inclusion or anti-racism and discrimination

Industry associations commented the Code should note discrimination and racism as unacceptable conduct.

Language to address anti-racism and discrimination has been included in the Code preamble.

Feedback on specific principles

The associations provided feedback relating to specific principles of the Code:

  • Principle 1 - The term best practices is undefined and could be replaced regulatory/legislative requirements.
  • Principle 3 - The word fairly should be changed to accurately.
  • Principle 4 – The word “must” should be used to describe only requirements in legislation and/or regulations.
  • Principle 5 – Include the word “disclosed” to qualify the clients’ circumstances
  • Principle 6 - Include the word “complete” to describe the disclosures to be provided.

The stakeholders’ suggested edits were incorporated by the MBRCC in the Code.

Other – Comments

Several commenters expressed views on topics beyond the scope of FSRA’s Approach Guidance for the Code:

  • Inflating client incomes to qualify for a mortgage; and submitting/referring deals to bank mortgage specialists. The commenter suggested that FSRA should collaborate with the Canadian Real Estate Association (CREA), the Real Estate Council of Ontario (RECO), and Office of the Superintendent of Financial Institutions (OSFI) to stop this from happening.
  • Mortgage advisors at the major banks must be held to the same standard as independent mortgage professionals, for the Code to achieve its purpose of protecting consumers.
  • Mortgage brokering sector licensing fees are too high. Consider introducing one “composite” licence/renewal fee for those that hold multiple licences.
  • Using broker commission to ‘buy down’ rates for clients. This practice should be abolished or allowed in the insurance sector as well.

FSRA thanks the stakeholders for sharing their views. The topics identified are beyond the scope of this consultation regarding our Approach to the MBRCC Code of Conduct.

Other – Questions

Stakeholders submitted several questions relating to FSRA’s Approach Guidance.

See Questions and Responses  for the questions and FSRA’s responses.