FSRA's principal broker webinar on new licensing requirements (November 9, 2022)

Jelena Pejic
00:01    Good morning. My name is Jelena Pejic, Senior Manager of Licensing Compliance with FSRA, and I'm joined this morning by Wendy Horrobin, Head of Licensing and Risk Assessment with FSRA. Thank you for joining this morning's webinar. We'll be sharing information about the new licensing classes and education requirements for mortgage agents and brokers. Before we begin, it's important to acknowledge the land we are on is the traditional territory of many nations, including the Mississaugas of the Credit, the Anishinabek, the Chippewa, the Haudenosaunee, and the Wendat peoples, and is now home to many diverse First Nations, Inuit, and Metis peoples. We acknowledge that Toronto is covered by Treaty 13 with the Mississaugas of the Credit and the Williams Treaties, signed with multiple Mississauga and Chippewa bands.

Jelena Pejic
00:48    As we see a few more attendees trickling in, I'll just go through a few housekeeping items. This morning we are on Microsoft Teams lives event. As an attendee, your audio and video have been automatically disabled. If you have any questions, you can enter them at any time during the presentation using the Q&A icon, which looks like a speech bubble with a question mark inside and is located at the top right-hand side of your screen. We will address questions at the end of the presentation. I'd also like to remind you that today's webinar is being recorded. A copy of the recording, the transcript, and today's presentation deck will be posted to FSRA's website in the weeks following the event. I hope you find today's information webinar informative, and let's begin.

Jelena Pejic
01:35    So today we'll be going through an overview and a background of the new requirements, and then we'll dive into the details related to the new licensing classes as well as the new education requirements. We'll spend some time talking about how to upgrade a license given the new license classes, as well as the requirements that will apply to current agents and brokers much like yourselves. We'll wrap things up with an overview of the key dates as well as resources that are available to you today. To start things off, I'll pass the mic to Wendy, who will kick things off. Go ahead, Wendy.

Wendy Horrobin
02:16    Thank you very much, Jelena, and thank you all for attending our principal broker webinar. We're thrilled to have such a great turnout and are looking forward to assisting you with these upcoming changes. Next slide, please. So today we'll be providing an overview as to how to maintain your own broker's license, how to support your agents and brokers through this transition, and finally, we'll provide you with some resources to assist you with moving forward with your operations. Next slide. Just a word on education. There are new principal lending education requirements for level 2 agents and brokers, and Jelena will be telling you about that as well. Next slide.

Wendy Horrobin
03:04    I wanted to give you a little bit of an idea as to-- next slide. Sorry, please. Wanted to give you a little bit of an idea of how we got here. The last review of the MBLAA took place in 2019. The government recommended that licensing reflect changing market conditions, specifically the proliferation of private lending. As a result, there are new education requirements that are specific to private lending, with the ultimate goal being that consumers are protected by receiving informed and suitable product choices by yourselves and your agents and brokers. Also, licensees, you are equipped with the education that you are required to have and that is commensurate with the business activities that you're undertaking. And with that, I'll pass it back to our resident expert, Jelena, who will tell you about the changes.

Jelena Pejic
04:06    Thank you, Wendy. We can move on to the next slide. So I'll start this morning's presentation with talking about the details of the new licensing classes. So there are three licensing classes that will be in place moving forward: the level 1 mortgage agent license, the level 2 mortgage agent license, and the mortgage broker license. The level 1 mortgage agent license will be able to deal and trade in mortgages with lenders that are financial institutions only. The level 2 mortgage agent license will be the graduated license that will allow an agent to transact in mortgages where it is any type of lender. And finally, the broker license remains in place. There is no change. So the broker will be able to continue to conduct mortgages with all types of lenders and will also be responsible for supervising mortgage agents. Let's talk a little bit more about the lenders. Next slide, please.

Jelena Pejic
05:04    So all agents and brokers, regardless of the level, will be able to transact in mortgages where the lender is a financial institution. The definition of a financial institution comes from the Mortgage Brokerages, Lenders and Administrators Act, and you'll see here on the screen it covers various entities such as banks, credit unions, insurance companies, and retail associations. All agents and brokers will also be able to transact with financial institutions that are approved by the CMHC under the National Housing Act, and that link is also posted on CMHC's website. They do post a list of those lenders. Next slide.

Jelena Pejic
05:41    Now, as we know, there are many lenders that conduct mortgages. And so all other types of mortgage lenders, for example, mortgage investment companies, private individuals, perhaps brokers or brokerages like yourselves who lend money, those types of transactions, they will be restricted to agent level 2s and brokers conducting them. So this means that any level 1 agent will not be authorized to deal or trade in mortgages with any of the lenders that we've aligned here on the screen. Next slide.

Jelena Pejic
06:13    You may be wondering how an agent level 1 can then gain the experience before they become an agent level 2. So the new requirements do allow for an agent level 1 to conduct job shadowing with either a level 2 agent or a broker. There are a couple of things to keep in mind. So it's important that the level 1 agent does not represent themselves or hold out as being licensed or authorized to deal in those types of transactions and that the level 2 mortgage agent or broker remain accountable to the client in those transactions. Next slide.

Jelena Pejic
06:46    All right, so now let's talk a little bit about the new education requirements. The new education requirements is the Private Lending Education Program. It does consist of two different parts: the Private Lending Course or the Challenge Exam. So all level 2 agents and brokers will need to complete either one or the other before they renew their license in 2024. It's important to note that if they do not complete this Private Lending Education Program, their license will be transitioned to a level 1 agent, which of course for folks like you, is quite important to keep in mind and to ensure that you do complete this program. Let's talk a little bit more about what those two different aspects are. Next slide.

Jelena Pejic
07:30    So the Private Lending Course will be made up of both a course and an exam, and it will be similar to what you see in the Mortgage Agent Course or the Mortgage Broker Course in terms of the delivery. FSRA will be posting more information about the approved course providers early in 2023, and items such as the cost and how you'll be able to access those courses will also be available at that time. The second item is the Challenge Exam. So the Challenge Exam has been put in place and is only available for anyone who has more than five years of continuous licensing experience. Similar to the course, it will become available in early 2023, and there will be approved providers for that exam. Some important aspects of the Challenge Exam to note is that there's only one attempt allowed. So if somebody is unsuccessful in passing the Challenge Exam, they will then need to complete the Private Lending Course. For that reason, the Challenge Exam will only be available until October 31st, 2023. That's to allow anybody who's unsuccessful to have sufficient time to complete the Private Lending Course before it's time to renew the license and meet that ultimate deadline. Next slide.

Jelena Pejic
08:43    Now we'll talk a little bit about upgrading the license, so how somebody will move through these new license classes. So the entry-level license, the requirements do not change. Somebody will need to complete the Mortgage Agent Course, they'll need to be sponsored by a brokerage, and they'll need to demonstrate that they're suitable to be licensed. As long as all of those are satisfied, they'll obtain an agent level 1 license. Upon 12 months as an agent level 1 license, they can then complete the Private Lending Education Program and apply to become a level 2 agent. Once they've spent 24 months as a level 2 agent, they'll need to complete the Broker Education Program and then they can-- and then they can apply to become the broker. Next slide.

Jelena Pejic
09:32    Now we'll talk a little bit about the transition requirements, and this is the piece that's going to apply to this group here. Next slide. So the transition requirements applies to any active agent and broker. It will also apply to any agent or broker who you may be bringing back into the industry whose license expired between March 31st, 2022, and will expire up to March 31st, 2024. Next slide. So the transition requirements have been separated into three categories. The first category is those agents who have less than one year of continuous licensing. At the moment, those people will have an agent license. And so come transition time, they will obtain an agent level 1 license. It's important to note that as of April 1st, 2023, their activities will become restricted to only dealing with lenders that are financial institutions.

Jelena Pejic
10:25    The second category is agents and brokers who have between one and five years of licensing experience. So if they currently hold an agent license, they'll be eligible to either obtain the level 1 or the level 2 license. If they currently hold a broker license, then they can continue to maintain that broker license. And on that category, it's important to note that those who get an agent level 2 license or a broker license willing to complete the Private Lending Education Program before they renew their license in early 2024.

Jelena Pejic
11:01    The final category is those who have been licensed continuously for five years or more. So this category is very similar to the prior one. So any agent will be able to obtain either a level 1 or a level 2 license. Any broker will continue to maintain that broker license, and if they do become a level 2 agent or if they maintain their broker license, they'll have to complete the Private Lending Education Program before the 2024 renewal. This group, however, will also have the opportunity to attempt the Challenge Exam if they so choose. And I think it's important to note that the Challenge Exam is not a mandatory item for this group. If somebody does not feel comfortable attempting the Challenge Exam, they can go straight to just taking the full course. Right, let's move on. Next slide.

Jelena Pejic
11:49    There will be some changes to Licensing Link to accommodate these new licensing classes. So Licensing Link is the portal that's used by all brokers and brokerages to take care of the licenses for their agents and brokers. So we've adjusted the Licensing Link portal, and you will see those changes in the 2023 renewal. Effectively, when you start the process to start renewing your agents and brokers, for the agents, you will see an option to either move them into an agent level 1 license or an agent level 2 license if they do qualify for that. For a broker license, it will almost look the same because there's no change to that broker license. As of April 1st, 2023, when the new licensing classes come into force, you'll see further updates to Licensing Link to again reflect the new licensing classes. So when bringing on a new agent, you will see that you'll be applying for a level 1 agent license for them. And likewise, to upgrade any existing agents, the upgrade applications have been updated to represent a level 1 agent-to-level 2 agent move, and then the next one being a level 2 agent-to-a-broker move. We will be sharing more instructions with you folks as we get closer to the launch date, but we did want to give you an early sense of how that will look and feel. Next slide.

Jelena Pejic
13:11    So we're coming to the end of the formal part of the presentation, but I did want to spend some time to go over the key dates as well as some resources that are available for you. So in early 2023, the Private Lending Course and Challenge Exam will become available. As soon as that's available, we will be providing information on our website and communicating that with the industry. In February and March 2023, so just in a few months, we'll go through our regular annual renewal cycle. And that's where you folks, as principal brokers, will be making the selections on behalf of your agents to determine whether they'll be moving into an agent level 1 or agent level 2 license. And of course, the brokers will also be renewing their license.

Jelena Pejic
13:53    As of April 1st, 2023, the new licensing classes will come into force. So that means that any licensee who holds an agent level 1 license as of that date will need to keep in mind that their activities are restricted to only dealing with lenders that are financial institutions. As 2023 rolls on, you will all be working towards your Private Lending Education Program. And for those who will qualify to take the Challenge Exam, it's important to keep in mind that October 31st date. So October 31st will be the ultimate deadline to complete the Challenge Exam.

Jelena Pejic
14:26    As we move through 2023 and into 2024, we'll once again go through our regular renewal in February and March 2024. At that renewal is where we will be validating to ensure that all level 2 agents and brokers have completed the Private Lending Education Program as required. It's important to note that you will be able to renew your license if you have not completed the Private Lending Education Program, but your license will be transitioned to a level 1 agent. So it's important to get that done before you apply to renew. And March 31st, 2024, is the deadline to complete the Private Lending Education as well as apply to renew your license. Next slide. Next slide. Thank you.

Jelena Pejic
15:13    So I just wanted to go through some of the various aspects that we've talked about today. So we've talked about what you need to do to maintain your broker license. We've provided information as well about how this will impact your agents and brokers. In terms of support for you and your brokerages, FSRA will be developing further resources to help guide your brokerages through the transition. And in the next few weeks, we'll be providing a specific communication that you can share with your agents and brokers to provide them with an overview of the changes and where to find the right information. And finally, it's important for you to take away this information and consider how some of these changes and new requirements will affect your brokerage's operations and consider whether any changes need to be made in order to remain compliant as of April 1st, 2023. Next slide.

Jelena Pejic
16:04    FSRA has published a guidance document, and we will be providing that link for you, where we've outlined all of these requirements in detail. We've also developed a web page on our website where we'll be providing information related to the licensing classes. So if you visit that web page, you'll see already that some of the key milestones and dates we've talked about today are on the web page, and we'll continue to provide that as we move forward.

Jelena Pejic
16:34    So this webinar has been recorded, as a reminder, and it will be available on FSRA's website. I did also want to flag that we will have another webinar next Tuesday, November 15th at 11:00 AM, though it is a similar topic on the licensing classes, but it's open for all mortgage agents and brokers. Invites have been sent out to all agents and brokers, and certainly we encourage you to encourage your agents and brokers to attend next week's webinar to provide them with information about this topic. Next slide.

Jelena Pejic
17:04    So thank you all for listening to the presentation, and I see that there have been lots of questions coming in, so we'll move into the question-and-answer period now. As a reminder, if you do have any questions, please use the Q&A button. It's on the top right-hand side of your screen, and it looks like a little chat bubble with a question mark inside.

Jelena Pejic
17:29    One of the common questions that I'm seeing is about the Challenge Exam and how many times somebody can take the Challenge Exam. So the Challenge Exam can be attempted once. If you're unsuccessful at passing the Challenge Exam, then you will have to take the Private Lending Course.

Jelena Pejic
17:47    Another common question is, "When will the exam or course be available, and who are the course providers? How much will it cost?" So all very, very good questions. The information related to both the course and the Challenge Exam will be posted in early 2023. And once the course providers are announced, you'll be receiving that information from them as well in terms of the cost and the particulars related to the course and the exam.

Jelena Pejic
18:12    Another question we're having here is, "Can I take the course or Challenge Exam before my 2023 renewal? What happens then?" So in 2023, to renew your license, it will be in February and March as usual. It will depend, really, when the course is available, but there's no requirement for the 2023 renewal to complete the course. So as soon as the information related to the course is posted, you can get started, but the course and exam need to be completed for 2024.

Jelena Pejic
18:43    "If we have a new agent apply in January 2024, will they have to take the Private Lending Course?" So any new entrant into the regime after April 1st, 2023, will come in in the same fashion as they do today. So that means they'll complete the Mortgage Agent Course, they'll need a sponsoring company, and they'll need to be also suitable to be licensed, and they'll obtain that level 1 license. So no, they don't need to complete the Private Lending Course.

Jelena Pejic
19:14    Another one is, "Will a private lender be required to verify an agent's license status before transacting on a deal with them?" So lenders will have to follow same processes they do today to ensure that they remain compliant, and so ensuring that they're dealing with a appropriately licensed person remains in place.

Jelena Pejic
19:35    "So what happens if the principal broker is a sole proprietor and doesn't finish the course? What happens to their license?" So sole proprietors are licensed as a brokerage, and the individual who's the principal broker holds a broker license. So if they do not complete the Private Lending Course ahead of the deadline, the principal broker's license is in jeopardy and will be transitioned to a level 1 license, and so that will cause problems for the brokerage license as well. So my feedback would be, please ensure that you're completing the course well ahead of that deadline.

Jelena Pejic
20:09    "For brokerages that do not do any business at all with privates, do they still need to take the private course?" Yes. So any licensee who holds an agent level 2 license or a broker license will need to complete the Private Lending Course in order to maintain their license after March 31st, 2024.

Jelena Pejic
20:30    I have another question here. "I have some licensed brokers who may not want to take the Private Lending Course and stay as a level 1. Will they still be able to market themselves as broker going forward into 2024?" So those individuals, if they would like to essentially transition their license to a level 1 agent, that is what they can do, but they will not be able to market themselves as brokers moving forward.

Jelena Pejic
21:01    Just reading through the questions here. "How will level 1 and level 2 agents be identified? If I receive a deal from an agent, how am I to know that they are an agent too?" So that's a great question. As part of some of the updates to the Licensing Link portal, we will also have updates to our public registry. So our public registry will be updated to show specifically who is a level 1 agent, who is a level 2 agent, and of course, the broker license as well.

Jelena Pejic
21:32    Another question we have is, "Are there any exceptions for those with over 10 years of experience as a broker or private lender?" So the exceptions are for those who have 5 or more years of experience. So it would include, of course, somebody with 10 or more years of experience, and what would be available to you is to complete the Challenge Exam rather than taking the full course.

Jelena Pejic
21:57    Another question we have is that, "Regulation 187/08 shows that effective April 1st, 2023, we need to show our new titles. How will this be possible if our new courses do not start until April 1st, 2023?" So we have established transition requirements. What that means is that in 2023, you will obtain that new license type, so whether it's a level 1 agent, a level 2 agent, or a broker. The transition period will go until March 31st, 2024, which means during that time, as long as that is the license you hold, you can market yourself as a level 2 agent or a broker. What's important to note is that you should be working on your Private Lending Education during that year, and so that in 2024, once the requirements are due, you're in the clear to continue using that license after 2024.

Jelena Pejic
22:51    And then one more question we have is about the difference between the Private Lending Course and the Challenge Exam. So again, more information will follow as FSRA works through accrediting the course providers and providing the information on our website. But in short, the Private Lending Course will consist of some instructions, so a course itself followed by an exam, whereas the Challenge Exam, effectively you will just be challenging an exam. So you will show up and write an exam and either pass or fail.

Jelena Pejic
23:27    Seems as though we've come to the end of our questions. Any questions that we have not been able to take today, perhaps if they are very specific scenarios, we will take those back and address them. We will be posting the questions and answers, including the ones I've addressed here live today, and we will be posting them on our website along with the recording. I wanted to thank you all for taking the time to be with us today. I hope you found this session very helpful, and a reminder that we will be posting the recording and responses, as I mentioned, that we were not able to get to today. As always, you can contact FSRA if you have any questions as well. Thank you and have a great day.