Purchasing a home is often the single largest financial commitment individuals and families can make. Many rely on a mortgage professional to help them finance or re-finance their home. It is critical that they get a financial product that best meets their needs.
To help mortgage brokers and agents provide their clients with recommendations for a suitable mortgage or investment in a mortgage, the Mortgage Broker Regulators’ Council of Canada (MBRCC) is developing principles for conducting mortgage suitability assessments.
The principles will set out regulators’ expectations of brokerages, brokers and agents to show that they are recommending mortgage products to their clients that are suitable based on the clients’ individual needs and circumstances.
Together with the MBRCC initiative, FSRA will issue Guidance adopting the MBRCC principles for conducting mortgage suitability assessments and setting out FSRA’s expectations on what reasonable steps brokers and agents should take to ensure the suitability of their mortgage recommendations.
In 2022, FSRA reviewed a sample of 63 private mortgages arranged by mortgage brokerages. The review found that most of these transactions did not have appropriate documentation to demonstrate how the mortgage product was deemed suitable for the client.
This finding, along with current economic conditions of higher interest rates and inflation affecting the real estate market, suggest a need for Guidance to help the sector with conducting proper suitability assessments to ensure the protection of the interests of borrowers and lenders/investors.
Mortgage product suitability is a requirement in Ontario.
Section 24 of Ontario Regulation 188/08 Standards of Practice: Mortgage Brokerages (O. Reg. 188/08) requires mortgage brokerages to take reasonable steps to ensure that any mortgage or investment in a mortgage presented for consideration is suitable for their client.