The Principal Broker is responsible for effectively supervising the conduct of a Mortgage Brokerage and its Brokers and Agents.
Effective supervision means that the Principal Broker can show that they have taken reasonable steps to ensure every requirement under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA) and its regulations are met, and that contraventions are addressed and handled appropriately.
Mortgage brokerages are required to immediately notify the Financial Services Regulatory Authority of Ontario (FSRA) if there are reasonable grounds to believe that a mortgage broker or agent is not suitable to be licensed. They can notify FSRA in writing by mail or fax and should include any supporting documentation. They can also use FSRA’s Complaint Form [PDF].
Principal Brokers who have questions related to legislative interpretation about their specific mortgage brokerage’s business conduct and its relevance to the law should seek legal advice.
What's on this page
- Policies and procedures manual
- Verification of client identity
- Best practices recommended by industry members
Policies and procedures manual
The MBLAA requires that a mortgage brokerage establish and implement policies and procedures providing for the adequate supervision of every broker and agent who is authorized to deal or trade in mortgages on its behalf.
It is the responsibility of the Principal Broker to ensure that the mortgage brokerage’s policies and procedures manual is adequately designed and to make recommendations for changes or amendments. FSRA does not review or approve public relations materials or policies and procedures manuals for individuals or mortgage brokerages.
Brokerages and administrators should refer to the Mortgage Broker Regulators’ Council of Canada’s (MBRCC) Code of Conduct for the Mortgage Brokering Sector. The principles in the Code of Conduct outline the professional behaviour and conduct expectations that consumers should expect when working with mortgage brokerages, brokers, agents and administrators.
One way to show that the Principal Broker and Brokerage are supervising and taking reasonable steps to ensure the compliance of its brokers/agents is to address the following key items in the policies and procedures manual:
Each mortgage brokerage is required to provide borrowers with a disclosure statement that contains the required information, including the cost of borrowing. FSRA does not require the use of a standard form for disclosing the cost of borrowing.
A mortgage brokerage can develop its own form, or it may choose to use one of the disclosure forms developed by the mortgage brokerage industry associations and vendors.
Disclosures for investors or lenders in private mortgage transactions and qualified syndicated mortgages (other than non-qualified syndicated mortgages, as of July 1, 2021) must be provided using FSRA’s prescribed Mortgage Brokering Forms.
Verification of client identity
Each mortgage brokerage has a duty to take reasonable steps to verify the identities of all parties in a mortgage transaction. If a mortgage brokerage is not able to verify the identity of one party, it must advise the other parties in the transaction.
The mortgage brokerage’s Principal Broker is responsible for developing policies and procedures for identity verification and ensuring that the mortgage brokerage can show that it took reasonable steps to verify the identities of all parties to the transaction. To determine what types of identification are acceptable for verifying identity, consult with your Principal Broker.
Best practices recommended by industry members
Depending on the size and business activity of a specific brokerage or administrator, additional practices may be appropriate to ensure awareness of, and compliance with, legislative requirements.1
Brokerages and administrators were asked to provide examples of practices they include in their policies and procedures manuals, over and above the legal requirements, to assist with supervision and ensuring compliant business conduct.
- Establishing policies regarding fees, e.g., maximum amounts for fees, when and what fees can be charged and brokerage guidelines for setting fees and charges.
- Establishing policies/processes for collecting supporting documents.
- Conducting spot audits of files to ensure compliance.
- Requiring a compliance checklist be used for each mortgage file.
- Confirming a complaints-handling processes.
- Ensuring policies and procedures are in place for office administration, loan origination, software, mortgage life insurance, ministry regulations and best practices.
- Establishing an approval process for communications materials.
- Setting a code of conduct/ethics,2 employment standards (where applicable) and an internal dispute resolution process.
- Establishing an appraiser/appraisal company selection process.
- Reviewing all transactions to ensure compliance with legislative requirements.
- Monitoring regulatory compliance throughout a transaction.
- Never delaying compliance reviews to facilitate the closure of files.
- Ensuring adequate steps are taken for client identification/validation and how that information is stored.
- Requiring client service agreements, where applicable.
- Obtaining client consent for credit report access.
- Ensuring secure electronic storage of documents pre- and post-file closure.
- Conducting regular performance reviews.
- Ensuring the mortgage brokerage approves all communications and marketing materials.
- Ensuring the Principal Broker approves and has copies of all correspondence going to the public.
- Requiring the Principal Broker to review each file and check that it complies with documentary and suitability requirements.
- Ensuring mortgage brokers and agents take required continuing education courses to maintain their licence.
- Creating an onboarding plan/program for new brokers and agents, including a list of mandatory workshops/training (as appropriate).
- Requiring additional ongoing training/education to reinforce compliance.
2 Brokerages/administrators are expected to incorporate the National Code of Conduct for the Mortgage Brokering Sector into their policy and procedures manual