August 8th - 2008

Seller take-back mortgages exempt from mortgage legislation

OREA members arranging seller take-back (or vendor take-back) mortgages as part of a real estate transaction are exempted from the requirements of the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA).

OREA members arranging seller take-back (or vendor take-back) mortgages as part of a real estate transaction are exempted from the requirements of the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA).
 
This exemption is a significant victory for OREA on behalf of REALTOR® members.
 
Under the MBLAA, individuals who are remunerated for dealing in mortgages or trading in mortgages in Ontario, as employees or otherwise, are required to be licensed as a mortgage broker or mortgage agent. The activities regulated under the Act include: dealing in mortgages, trading in mortgages, carrying on the business of lending money on the security of real property, and carrying on the business of administering mortgages in Ontario.
 
Officials of the Ministry of Finance and the Financial Services Commission of Ontario had become convinced that the exemption for seller take-back mortgages in the current Mortgage Brokers Act created a “regulatory gap” that should be removed to enhance consumer protection and to ensure a consistent regulatory environment for everyone dealing in mortgages.
 
After months of discussion OREA convinced officials that the “regulatory gap” they were attempting to fill did not in fact exist. A seller take back mortgage is a clause in an Agreement of Purchase and Sale and is part and parcel of a trade in real estate. It is a function of arranging the terms between the buyer and the seller. Arranging a seller take-back mortgage is not in fact brokering mortgages and so providing a specific exemption for seller take-back mortgages was the best way to resolve the issue.
 
The Real Estate Council of Ontario (RECO) assisted OREA’s efforts by confirming OREA’s assertion that RECO’s Code of Ethics applies to all clauses in Agreements of Purchase in Sale, including seller take-back mortgages.
 
The exemption was granted in June and came into effect July 1, 2008 when the Mortgage Brokers, Lenders and Administrators Act, 2006 came into force.
 
For more information about the MBLAA visit http://www.fin.gov.on.ca/.

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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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