Guidance
☑ Interpretation ☑ Approach ☐ Information ☐ Decision
No. MB0047INT Active
Contents
Transition to the new licensing requirements
New Continuing Education requirements effective April 1, 2023
Applications for education and experience equivalency
Supervision approach and principles
Effective date and future review
Appendix 1: Mortgage agent level 1 scope of work scenarios
Purpose
This Guidance1 provides FSRA’s interpretation and approach for the implementation of:
- the proposed new licensing provisions set out in section 1, subsections 2(1)5, 2(1)6, 2(3) and sections 5, 5.0.1, 5.0.2 and 6 of Ontario Regulation 409/07 (“O. Reg. 409/07”) under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (“MBLAA”)
- new continuing education (“CE”) requirements per subsection 9(1)4 of O. Reg. 409/07
Scope
This guidance affects the following FSRA licensees:
- mortgage agents
- mortgage brokers
- mortgage brokerages
The guidance also applies to individuals applying for a new licence or individuals licensed in other provinces who are seeking a licence in Ontario.
Rationale and background
The 2019 Report to the Minister of Finance on the Legislative Review of the MBLAA (“2019 MBLAA Review Process”) recommended that the Ministry of Finance (“MOF”) work with FSRA, in consultation with the industry, to propose options for licensing schemes that better respond to the unique practices required by certain segments of the mortgage market.
Stakeholder feedback received during the 2019 MBLAA Review Process indicated that licensees working with private mortgage lenders and raising capital require a specific set of competencies, which should be reflected in the licensing and education requirements.
In response, the Government proposed effective April 1, 2023:
- the establishment of a separate licence for mortgage agents who transact in private mortgages and arrange investments for private investors / mortgage lenders
- enhanced education and experience requirements for mortgage agents and brokers
The new proposed licence for mortgage agents includes enhanced requirements that address the need for agents (as well as brokers) to have additional education, knowledge and experience regarding private mortgages.
Private mortgages may have terms and conditions that pose unfamiliar risks to consumers,2 given that they are not underwritten in the same way as those offered by more traditional financial institutions. Mortgage agents and brokers must have the appropriate expertise to recommend products that meet consumers’ needs. They must take reasonable steps to properly understand, assess and inform consumers of any potential risks associated with private mortgages or mortgage investments.
The proposed new mortgage agent licence and enhanced mortgage agent and broker requirements support the following outcomes:
- education/competency requirements that better align with activities in the mortgage market
- enhanced consumer protection as borrowers and lenders / investors receive appropriate levels of information and recommendations to make informed decisions relevant to their mortgages / mortgage investments
- enhanced confidence in the mortgage brokering industry as licensees are prepared for their career in the mortgage brokering sector
The implementation of the proposed new licensing classes by FSRA aligns with:
- FSRA’s statutory objects as set out in the Financial Services Regulatory Authority of Ontario Act, 2016 (“FSRA Act”), specifically:
- to contribute to public confidence in the mortgage brokering sector
- to promote high standards of business conduct
- to protect the rights and interests of consumers
- Principles 4, 5 and 6 of the Mortgage Broker Regulators’ Council of Canada’s (MBRCC) Code of Conduct for the Mortgage Brokering Sector (“the MBRCC Code of Conduct”), which state:
- Principle 4 – “Competence: Regulated persons must maintain the skills, knowledge, and aptitudes necessary for their business activities. They should decline to act when they are unable to provide products/services in accordance with this Code.”
- Principle 5 – “Suitability: Regulated persons and entities must take reasonable steps to present products/services that are suitable for their client(s). They must have a sound understanding of how the products/services match the disclosed circumstances of their client(s).”
- Principle 6 – “Disclosure: Regulated persons and entities must fully disclose material information to applicable parties in a transaction. Disclosures must be meaningful and made in an honest and timely manner.”
Interpretation/Approach
Under subsections 2(3), 3(3) and 4(2) of the MBLAA, those who deal, trade or lend in mortgages must be licensed by FSRA unless exempted from doing so as described under section 6. Individuals need to meet the licensing eligibility criteria in sections 2, 5, 5.0.1, 5.0.2 and 6 of O. Reg. 409/07.
New licensing classes
It is proposed that effective April 1, 2023, the following new licence classes would be established under sections 2, 5, 5.0.1 and 5.0.2 of O. Reg. 409/07 for individuals seeking a mortgage agent or broker licence in Ontario:
- Mortgage agent level 1 licence authorizes licensees to deal and trade3 in mortgages provided by:
- financial institutions, as defined in section 1 of the MBLAA
- lenders approved by Canada Mortgage and Housing Corporation (“CMHC”) under the National Housing Act (“NHA”)
- Mortgage agent level 2 licence authorizes licensees to deal and trade in mortgages provided by:
- financial institutions, as defined in section 1 of the MBLAA
- lenders approved by CMHC under the NHA
- all other lenders, such as mortgage investment companies, syndicates, private individuals, agents, brokers, and brokerages
- Mortgage broker licence authorizes licensees to deal and trade in mortgages provided by:
- financial institutions, as defined in section 1 of the MBLAA
- lenders approved by CMHC under the NHA
- all other lenders, such as mortgage investment companies, syndicates, private individuals, and brokerages
Mortgage brokers can supervise mortgage agents (levels 1 and 2) and can be appointed as the principal broker for a brokerage.
Individual licensee accountability in transactions
Level 2 mortgage agents and brokers may engage level 1 mortgage agents in private mortgage transactions for training purposes. In these circumstances, the mortgage agent level 1 must not hold out or represent to clients that they are qualified to complete private mortgage transactions. The mortgage agent level 2 and/or the mortgage broker are accountable to clients for these transactions. See Appendix 1 for more details.
New licensing requirements
For the proposed new licensing classes, licence applicants must meet the education and experience requirements set out in Table 1.
Subsections 2(1)5, 2(1)7, 5.0.1(1)5 and 5.0.2(1)5 of O. Reg. 409/07 require that individuals seeking to obtain a licence successfully complete an education program approved by the Chief Executive Officer (“CEO”) of FSRA. The education programs that the CEO has approved for the proposed new licensing classes are found in Table 1.
The mortgage agent level 2 and broker education programs include a Private Mortgages Course. The objective of the course is to ensure that licensees have enhanced knowledge about the regulatory framework, transaction processes, fraud and risks associated with private lending vehicles. The course aligns with the MBRCC Private Lending Competencies and Curriculum and the MBRCC Code of Conduct.
Subsections 2(1)6 and 5.0.2(1)6 of O. Reg. 409/07 set out the experience requirements to obtain the mortgage agent level 2 and mortgage broker licences, as proposed in Table 1.
The education and experience requirements for the new licensing classes effective April 1, 2023 are found in Table 1. They apply to individuals not covered by the transition timelines in Table 2.
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Table 1: Licensing and Experience Requirements effective April 1, 2023
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Requirement
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Mortgage agent level 1
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Mortgage agent level 2
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Mortgage broker
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Experience
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No experience required. | Applicants must have at least 12 months experience over the last 24 months as a mortgage agent level 1. | Applicants must have at least 24 months experience over the last 36 months as a mortgage agent level 2. |
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Licensing education
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Applicants must:
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Applicants must:
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Applicants must:
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Approved education program
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The mortgage agent Level 1 education program consists of:
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The mortgage agent level 2 education program consists of:
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The mortgage broker education program consists of:
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Continuing Education
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Subsection 9(1)4 of O. Reg. 409/07 addresses the continuing education requirements for licensees to renew their licence. See requirements in Table 4. | ||
Transition to the new licensing requirements
Transition milestones*
The transition period for the new licensing requirements starts April 1, 2023 and ends March 31, 2024. Below are the key transition milestones:
- April 1, 2022: Final amendments to O. Reg. 409/07 and FSRA Guidance posted*
- Fall 2022: Private Mortgages Course and Challenge Exam available
Licensees who choose to transition to the mortgage agent level 2 or mortgage broker licence can begin taking the Private Mortgages Course or Private Mortgages Course Challenge Exam (“Challenge Exam”). Licensees have until March 31, 2024 to meet the education requirements but can complete the requirements by April 1, 2023.
Details about the Challenge Exam are provided on the following page. Only licensees with five or more years of continuous licensing are eligible to complete the Challenge Exam. Licensees have until March 31, 2024 to complete the education requirements.
- April 1, 2023: New licensing classes come into force*
As of April 1, 2023, mortgage agents and brokers will be issued the mortgage agent level 1, level 2, and broker licences, based on the requirements described in Table 2. Existing licensees will be issued a new licence as part of the 2023 licensing renewal4 cycle.
- March 31, 2024: Final date to complete new education requirements
Mortgage agent level 2 and mortgage brokers must complete the education requirements by March 31, 2024. Licensees who do not meet the education requirements will automatically be transitioned to the mortgage agent level 1 licence upon renewing their licence.
*Pending government approval.
Demonstration of private lending competencies
All existing licensees who are eligible and wish to transition to the mortgage agent level 2 or mortgage broker licence must demonstrate their competency in dealing and trading in private mortgages as described in Table 2, by either:
The Challenge Exam option is ONLY offered to agents and brokers who have five or more years of continuous licensing experience.7
The Challenge Exam:
- is available to those who believe they have the experience and competencies reflected in the new education requirement to be a mortgage agent level 2 or mortgage broker
- may only be attempted once; individuals who do not pass the Challenge Exam must complete a Private Mortgages Course
The Private Mortgages Course8 and Challenge Exam are based on the MBRCC’s Private Lending Competencies and Curriculum. They are designed to ensure that licensees have the competencies to transact in private mortgages consistent with the MBRCC Code of Conduct and the MBLAA requirements.
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Table 2: Transition Period Requirements – April 1, 2023 – March 31, 2024
Appendix 2 provides examples of how the new requirements will be applied to different scenarios. |
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Licensing history
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Current licence
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Requirement for new licence
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| Individuals with five or more years of continuous licensing as of April 1, 2023. | Mortgage agent | To transition to mortgage agent level 2, individuals must:
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| Mortgage broker | To maintain their mortgage broker licence, individuals must:
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| Individuals with less than five but one or more years of continuous licensing as of April 1, 2023. | Mortgage agent | To transition to mortgage agent level 2, individuals must:
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| Mortgage broker | To maintain their mortgage broker licence, individuals must:
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| Individuals with less than one year of continuous licensing | Mortgage agent | To transition to mortgage agent level 2, individuals must:
See Table 1 for further details. |
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| Mortgage broker | To maintain their mortgage broker licence, individuals must:
Brokers are exempt from attaining two years' experience as an agent, level 2 prior to transitioning to the new broker licence. |
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Transition requirements for former licensees / reinstated licences
Under subsection 3(1) and section 6 of O. Reg. 409/07, an individual who was previously licensed by FSRA is exempted from the prescribed education and experience requirements if the individual was licensed at any time during the last 24 months before applying for a licence.
For the purposes of the transition to one of the new licensing classes, individuals who apply to reinstate their licence post April 1, 2023 must meet the requirements in Table 2. Appendix 2 includes examples of the requirements when former licensees are applying to reinstate their licence during the transition period.
Licensing fees
Subsection 21(2) of the FSRA Act provides FSRA with authority to make rules governing fees and other charges deemed appropriate for its operation.
The licensing fees for a mortgage agent or mortgage broker licence are set by FSRA’s Fee Rule. In the 2022-2023 fiscal year, FSRA will be reviewing the mortgage broker sector fees set in FSRA Fee Rule 2019-001. FSRA will post for public consultation any proposed changes to the Fee Rule.
New Continuing Education requirements effective April 1, 2023
Under subsection 9(1)4 of O. Reg. 409/07, licensees must complete a FSRA-approved continuing education (CE) requirement to renew their licence.
FSRA is enhancing the CE requirement to ensure that licensees obtain and maintain the skills and knowledge that are consistent with changes in the mortgage market.
FSRA’s proposed enhanced CE requirement includes two types of learning outcomes (see Table 3):
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Table 3: FSRA’s CE Learning Outcomes
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Conduct CE requirements
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FSRA selects topics, learning objectives and outcomes that help ensure licensees remain current on topics identified as important by FSRA.
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Technical Knowledge / Professional Development CE requirements
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Licensees select professional development topics and learning objectives and outcomes that relate to the licensee’s business focus.
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The new CE requirements are being phased in.
What stays the same:
- licensees must complete the appropriate CE requirement every two years, by March 31, in a year ending with an even number
- the term of the CE cycle remains unchanged at two years. It runs from April 1 to March 31 — for example, April 1, 2020 to March 31, 2022 (and so on every two years)
- FSRA typically provides the sector with details of the CE requirement in the fall
What is new:
- licensees must complete the FSRA CE requirements by licence category outlined in Table 4 beginning with the April 1, 2024 to March 31, 2026 cycle. This is the new conduct and technical knowledge requirements which will be required by March 31, 2026.
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Table 4: FSRA Conduct and Technical Knowledge / Professional Development CE Requirements
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Licence Category
The new program will be implemented : |
Conduct CE
March 31, 2026 |
Technical Knowledge / Professional Development CE9
March 31, 2026 |
Total CE Hours
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| Mortgage agent level 1 | 5 - 8 hours | 10 hours | 15 -18 hours |
| Mortgage agent level 2 | 5 - 8 hours | 10 hours | 15 -18 hours |
| Mortgage broker | 5 - 10 hours | 10 hours | 15 -20 hours |
Labour mobility
The Canadian Free Trade Agreement and the Ontario Labour Mobility Act, 2009 make it easier for individuals licensed in another Canadian province or territory to apply for and receive a licence for the same occupation in Ontario.
With the proposed new licensing provisions, individuals licensed in a Canadian province or territory must meet the education requirements under subsections 2(1)5 and 5.0.2(1)6 of O. Reg. 409/07 to obtain a mortgage agent level 2 or mortgage broker licence.
During the transition period, individuals licensed in the provinces listed below may transition to a mortgage agent level 2 or mortgage broker licence, following the requirements set out in Table 2:
- British Columbia
- Alberta
- Saskatchewan
- Manitoba
- New Brunswick
- Quebec
The post-transition reciprocity requirements will be available on the FSRA website once this Guidance is finalized following this consultation.
Applications for education and experience equivalency
Under subsections 2(2), 5.0.1(2) and 5.0.2(2) of O. Reg. 409/07, the CEO may issue to an individual a mortgage agent or mortgage broker licence, if the CEO is satisfied that the individual has the education and experience equivalent to the applicable requirements.
Individuals who wish to obtain a licence, and who have relevant experience and education in a related field but not in the mortgage brokering sector, may apply to FSRA to demonstrate if they meet FSRA’s equivalency to the applicable requirements for any of the proposed new licensing classes:
- mortgage agent level 1 licence
- mortgage agent level 2 licence
- mortgage broker licence
Individuals must successfully complete the Private Mortgages Course once FSRA has approved their equivalency application for the mortgage agent level 2 or broker licence.
For more information regarding FSRA’s education equivalency requirements, see: https://www.fsrao.ca/licensing/mortgage-broker/become-mortgage-broker/education-equivalency-requests-mortgage-agent-or-broker-licence
Supervision approach and principles
FSRA’s supervision approach has not changed as a result of the proposed new mortgage agent and mortgage broker licensing requirements. FSRA’s general approach to supervision continues to reflect:
- Proactive, Risk-based Approach – FSRA focuses its supervision on high-risk licensees and activities posing a higher risk of consumer harm. FSRA targets its supervision resources based on the establishment of risk criteria and the risk profiling of mortgage brokerages. Risk profiling considers numerous factors such as:
- number of brokers, agents, and locations
- compliance history of the brokerage and its sponsored brokers and agents, including complaints received and supervision review outcomes
- Focus on Oversight and Controls – FSRA expects brokerages to have effective internal processes and supervision to promote high standards of conduct and to effectively identify and manage conduct risks that could lead to poor or unfair outcomes for consumers.
- Proportionate Approach to Discipline – FSRA uses a range of compliance and enforcement tools to influence marketplace behaviour and ensure compliance with the MBLAA and its regulations. The tools used depend on, for example, the nature and extent of risks to consumers, mitigating actions taken by licensees, and past supervisory findings.
Compliance and enforcement
The MBLAA requires that licensees only engage in mortgage brokering activities permitted under their licence.
Failure to comply with licensing requirements may result in supervisory or enforcement action against the licensees, their brokerages and their principal brokers, including letters of caution, the imposition of licence conditions, suspension, revocation, enforcement proceedings seeking administrative monetary penalties, and public warning notices.
FSRA will carry out these compliance activities under subsection 35(1) of the MBLAA.
Effective date and future review
This Guidance becomes effective on TBC and will be reviewed no later than TBC.
About this guidance
Interpretation guidance sets out FSRA’s view of requirements under its legislative mandate (i.e., legislation, regulations and rules) so that non-compliance can lead to enforcement or supervisory action.
Approach guidance describes FSRA’s internal principles, processes and practices for supervisory work, action, and application of CEO discretion.
Visit FSRA’s Guidance Framework to learn more: https://www.fsrao.ca/regulation/guidance/fsra-guidance-framework
Appendix 1: Mortgage Agent Level 1 scope of work scenarios
- Can a mortgage agent level 1 job shadow a mortgage agent level 2?
Yes. A mortgage agent level 1 can job shadow a mortgage agent level 2 or broker, for the purposes of training. The proposed new licensing classes are not intended to prevent brokerages from training a mortgage agent level 1 on private mortgages, provided only a mortgage agent level 2 or a broker is accountable to clients for these private mortgage transactions.
- Can a mortgage agent level 1 receive compensation for work completed while job shadowing?
Mortgage brokerages are responsible for the remuneration of agents and brokers10 and, therefore, determine whether a mortgage agent level 1 will receive compensation for work completed while job shadowing. This decision is based on the business model of each mortgage brokerage. The brokerage should outline the specific tasks that are subject to remuneration. Such remuneration should not be perceived as anything other than remuneration for the tasks related to job shadowing.
- Can a mortgage agent level 1 conduct suitability assessments for private lenders?
No. A mortgage agent level 1 can only conduct suitability assessments of mortgages for lenders who are financial institutions or approved lenders under the NHA. A mortgage agent level 2 and broker can conduct suitability assessments of mortgages / mortgage investments for all mortgage lenders, including private lenders.
Appendix 2: Transition requirement scenarios
The following scenarios are provided to help existing and former licensees understand the transition requirements for the new licensing classes.
General transition scenarios
- I obtained my mortgage agent licence in January 2023 and will have three months licensing experience as of April 1, 2023. What class of licence will I obtain from FSRA when the new licensing regime comes into force?
When you renew your licence for the April 1, 2023 licensing cycle, you will be issued the mortgage agent level 1 licence because you have less than one year of continuous licensing experience.
You can apply for a mortgage agent level 2 licence in February 2024, once you have one year of continuous licensing experience and have successfully completed the Private Mortgages Course.
- I obtained my mortgage agent licence in April 2019 and will have four years of continuous licensing experience as of April 1, 2023. What class of licence will I obtain from FSRA when the new licensing regime comes into force?
When you renew your licence for the April 1, 2023 licensing cycle, you will be issued the mortgage agent level 2 licence because you have at least one year of continuous licensing experience. You must successfully complete the Private Mortgages Course by March 31, 2024, or you will be transitioned to the mortgage agent level 1 licence.
You do not need to complete the Private Mortgages Course if you would like to obtain a mortgage agent level 1 licence rather than a mortgage agent level 2 licence. See Table 2 in the Guidance for more information on the transition requirements.
- I obtained my mortgage agent licence in April 2016 and will have seven years of continuous licensing experience as of April 1, 2023. What class of licence will I obtain from FSRA when the new licensing regime comes into force?
When you renew your licence for the April 1, 2023 licensing cycle, you will be issued the mortgage agent level 2 licence. Since you have at least five years of continuous licensing experience, you can successfully complete the Private Mortgages Course or the Challenge Exam. You must successfully complete the Private Mortgages Course or Challenge Exam by March 31, 2024, or you will be transitioned to the mortgage agent level 1 licence.
If you would like a mortgage agent level 1 licence rather than a mortgage agent level 2 licence, you do not need to complete the Private Mortgages Course or Challenge Exam. See Table 2 in the Guidance for more information on the transition requirements.
- I have mortgage broker qualifications, but I am currently licensed as a mortgage agent. Can I apply for a mortgage broker licence during the transition period?
Yes. You can apply for a mortgage broker licence if you have been licensed for a total of at least 24 of the 36 months as a mortgage agent, agent level 1 or agent level 2 immediately before applying for the broker licence. You will need to confirm that you have successfully completed the Mortgage Broker Course. You must also successfully complete the Private Mortgages Course by March 31, 2024. See Table 2 in the Guidance for more information on the transition requirements.
- I obtained my mortgage broker licence in April 2016 and will have seven years of continuous licensing experience as of April 1, 2023. What are the requirements to obtain a mortgage broker licence when the licensing regime comes into force?
When you renew your licence for the April 1, 2023 licensing cycle, you will be issued the new mortgage broker licence. Since you have at least five years of continuous licensing experience, you can successfully complete the Private Mortgages Course or the Challenge Exam. You must successfully complete the Private Mortgages Course or Challenge Exam by March 31, 2024, or you will be transitioned to the mortgage agent level 1 licence.
See Table 2 in the Guidance for more information on the transition requirements.
- I am currently a principal broker and have seven years of continuous licensing experience as a mortgage broker. What happens if I fail the Private Mortgages Course or Challenge Exam during the transition period?
If you fail the Private Mortgages Course or Challenge Exam, you will be issued the mortgage agent level 1 licence. FSRA will work with the mortgage brokerage to obtain another principal broker.
Licence reinstatement scenarios
- I was previously licensed as a mortgage agent from February 2018 to April 2022 and have four years of continuous licensing experience. What are the requirements to re-instate my licence when the new licensing classes come into force?
If you apply on April 1, 2023 to reinstate your licence, you will be issued the mortgage agent level 2 licence, because you have at least one year of continuous licensing experience. You must successfully complete the Private Mortgages Course by March 31, 2024, or you will be transitioned to the mortgage agent level 1 licence.
If you choose to reinstate as a mortgage agent level 1 rather than a mortgage agent level 2, you do not need to complete the Private Mortgages Course. See Table 2 of the Guidance for more information on the transition requirements to reinstate a licence.
- I was previously licensed as a mortgage broker from February 2016 to April 2021 and have five years continuous licensing experience as a broker. What are the requirements to reinstate my licence when the new licensing classes come into force?
If you apply on April 1, 2023 to reinstate your licence, you will be issued a mortgage broker licence. Since you have at least five years of continuous licensing experience, you can successfully complete the Private Mortgages Course or the Challenge Exam. You must successfully complete the Private Mortgages Course or Challenge Exam by March 31, 2024, or you will be transitioned to the mortgage agent level 1 licence.
If you choose to reinstate as a mortgage agent level 1 rather than a mortgage broker, you do not need to complete the Private Mortgages Course or Challenge Exam. See Table 2 for more information on the transition requirements to reinstate a licence.
- I was previously licensed as a mortgage agent from February 2015 to April 2019. What are the requirements to reinstate my licence when the new licensing classes come into force?
Individuals must have been licensed at any time during the last 24 months before applying to reinstate a licence. You cannot reinstate your licence if you apply on April 1, 2023 because it has been more than two years that your licence has expired.
Reference
MBRCC Code of Conduct
MBRCC Private Lending Competencies and Curriculum
Canadian Free Trade Agreement
1This guidance is a combination of Interpretation and Approach under FSRA’s Guidance Framework.
2Consumers include borrowers, lenders / investors, and prospective clients.
3The mortgage agent level 1 can trade in syndicated mortgages where all the lenders in the syndicate are financial institutions or CMHC NHA approved lenders.
4Renewal applications include current licensees transitioning to a new licence class.
5See FSRA’s Interpretation and Approach Guidance on the Accreditation of Licensing Courses for the Mortgage Brokering Sector.
6The applicant must complete the course and pass the exam for the course.
7The term “continuous licensing” in this document allows for one absence from licensing of a maximum of two years.
8The Private Mortgages Course includes an exam as part of the final step towards completing the course.
9Professional Development CE hours cannot be carried over into the next CE cycle.
10Subsection 4(1) of O. Reg. 187/08 under the MBLAA.