Holiday Closure

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Holiday Closure

The OREA office will close for the holidays at 12 p.m. Tuesday, December 24th.  Normal business hours will resume on Thursday, January 2nd.  Happy Holidays!

May 18th - 2005

Consultation sought on New Mortgage Broker Proposals

The Ontario government is modernizing the legislation regulating the mortgage broker industry.

The Ontario government is modernizing the legislation regulating the mortgage broker industry. In June 2004, the government released a consultation paper Improving the Mortgage Brokers Act and received submissions from industry associations and other stakeholders. Responding to the input received, on March 21, 2005 the government released a consultation draft of a Mortgage Brokerages, Mortgage Lenders and Mortgage Administrators Act and proposed licensing regulations. The government is currently seeking input on this draft legislation.

Deemed to be mortgage brokers
Since the 1970s, real estate brokers have been deemed to be registered as mortgage brokers, whether or not they carry on business as mortgage brokers. However, as with all registrants under the Mortgage Brokers Act, real estate brokers are required to fulfill ongoing requirements of the Act. These include providing disclosure documents to clients, and filing annual financial statements with the Superintendent of Financial Services, Financial Services Commission of Ontario (FSCO).

Other concerns
Although real estate brokers benefit from a well-regulated mortgage brokering industry, they do not share in the costs associated with the regulation of the industry. In addition, deeming makes it difficult for the regulator (FSCO), to take enforcement action where necessary if a real estate broker is not complying with the Mortgage Brokers Act.

A key proposal in the draft legislation is removal of the provision that deems real estate brokers to be registered as mortgage brokers. The draft regulation includes transition provisions that would allow existing real estate brokers to qualify to be licensed as mortgage brokers without meeting any additional education requirements.

The following provides some questions and answers of particular relevance to real estate brokers.

Why would real estate brokers no longer be deemed to be mortgage brokers?
Currently real estate brokers are deemed to be registered as mortgage brokers and therefore must meet the ongoing requirements under the Mortgage Brokers Act.

The proposed legislation would require real estate brokers who are dealing or trading in mortgages, or carrying on business as a mortgage lender or administrator to be licensed with FSCO, and to meet education and suitability requirements similar to those of all other licensees. This is in line with two key objectives of the new legislation: improving consumer protection and reducing unnecessary regulation. In addition, consideration will be given to courses that real estate brokers are required to take as part of their real estate training.

What about real estate brokers who only want to refer clients to mortgage brokers or lenders?
Under the proposed legislation, simple referrals for a fee would be exempt from the licensing requirements, provided that the referring person does not deal in mortgages or engage in an activity that would require licensing. This means real estate brokers would not have to be licensed as mortgage brokers if they are receiving referral fees as long as they are simply passing the client along to the mortgage broker or lender. If real estate brokers fill out forms they would be considered to be dealing in mortgages and would be required to be licensed by FSCO.

Would real estate brokers have to take more courses to be licensed as mortgage brokers?
FSCO is reviewing education requirements for all licensees. As part of this review, FSCO will take into account the education real estate brokers already receive. The review will seek input from the industry.

Would current real estate brokers continue being able to do mortgage brokering?
If the proposal becomes law, a real estate broker would have one year after proclamation of the new law to apply to be licensed as a mortgage broker without being required to meet any additional education requirements. After the year, real estate brokers would be subject to any new education requirements that result from the education review.

To whom should comments be submitted?
You may review the consultation draft, its explanatory notes and proposed regulations and provide the Government with your comments. The material is available online at http://www.fsco.gov.on.ca. The site also contains information for submitting comments.

This article was submitted by the Financial Services Commission of Ontario (FSCO), which regulates insurance, pensions, credit unions, caisses populaires, cooperatives, mortgage brokers and loan & trust companies, and has been edited for length.

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For more information contact

Ontario Real Estate Association

Jean-Adrien Delicano

Senior Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
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