FSRA has found that some mortgage administrators, especially lenders like mortgage investment entities, are performing regulated activities without having a mortgage brokerage licence, even though this licence is required.

This work includes:

  • arranging mortgage renewals directly with borrowers
  • soliciting investors/lenders to invest in mortgages

Conducting activities without having the appropriate licence puts you and your clients at significant risk.

Read on to learn what you can and can’t do as an administrator and how to stay compliant.

Context

Mortgage administrators are permitted to perform certain clerical tasks on behalf of a lender. However, an administrator licence only allows you to administer mortgages, not negotiate or renegotiate them. To handle mortgage renewals, you must also hold a brokerage licence.

Even when renewing a mortgage on the same terms for a lender, a new suitability assessment is required for both borrowers and investors. Their circumstances may have changed since the mortgage was first signed, and you must ensure the product still meets their needs. Conducting a suitability assessment requires a brokerage licence.

What are the risks?

Operating without a brokerage licence can:

  • expose borrowers to unprepared or mismatched investors, increasing the chance of losing a client or being the target of legal action
  • match less sophisticated investors to potentially unsuitable investments, raising the risk of lawsuits in the event of defaults or redemptions
  • put yourself and your business at risk of FSRA enforcement action, and potentially higher E&O insurance premiums

What should I do to stay compliant?

  • ensure you hold the correct licence for the activities you perform
  • if you don’t have a brokerage licence, conduct those activities that require one through a licensed brokerage
  • clearly communicate that any clerical work is being done on behalf of a lender. Avoid implying the documents originate from your firm

Learn more:

Appropriate mortgage administration and associated activities are explained in MBLAA, s. 5(1), O. Reg. 406/07 and O. Reg. 189/08.