Transparency is essential in all mortgage transactions, particularly private mortgages. Borrowers need a clear understanding of every fee, including why it was charged and who receives it, to make an informed decision. Presenting fees prominently and labeling them accurately at every stage helps protect consumers and maintain the integrity of Ontario’s mortgage market.

While the annual percentage rate (APR) provides a snapshot of borrowing costs, it’s not enough to disclose this number alone. Under the law (MBLAA) disclosures must also be clear, simple and prominent.

Here is a quick and easy guide to follow when making disclosures:

  • Plain language: MBLAA requires that information be presented clearly, logically and in simple terms. Jargon that obscures costs violates this requirement.
  • Accurate labeling: every fee should be explicitly named. Proper labeling ensures borrowers can distinguish between brokerage, lender and administrative fees.
  • Accurate disclosure: recent examinations have revealed incorrect APR practices because certain fees are being included or left out. Be sure to double check against O. Reg. 191/08 Sections 3 and 5 when calculating and making APR disclosures.
  • Avoid fine print: burying renewal fees in fine print prevents a borrower from accurately comparing products and ultimately could result in the product being unsuitable for that client.
  • Ongoing assessment: Renewals are considered to be a “new” transaction and attract the same regulatory requirements as the initial transaction. As such, FSRA expects brokers and agents to undertake appropriate due diligence, including a renewed product suitability assessment, when a mortgage is being renewed. The obligation to treat consumers fairly does not expire after the first year.

Remember, a private mortgage is a short-term solution which ends sooner than a traditional mortgage where borrowers need to have an exit strategy that may include renewal options. Obscured fees, including renewal fees and inadequate disclosure, can undermine the ability to plan a viable exit.

FSRA expects you to always document how you assessed that a product was suitable for a given customer. This includes verifying that the borrower can afford both the initial loan and is aware of potential renewal costs. Failing to highlight the risk of high renewal fees is a noted deficiency in recent audits.

For more information on your obligations, review our Guidance on Mortgage Product Suitability.