Standards of Conduct for all Mortgage Brokerage Professionals

RECA developed the Industry Professional Standards of Conduct to assist consumers with understanding the conduct expected of industry professionals.

The Standards of Conduct are plain-language summaries of Part 2 of the Real Estate Act Rules, Industry Standards of Practice. Should any discrepancy occur between these Standards of Conduct and the Real Estate Act Rules, the Rules take precedence.

 

Sections 64-75: Mortgage Brokerage

Working with a mortgage brokerage professional

Borrowers enter into an agency relationship with a mortgage brokerage when they agree that the brokerage and its licensed professionals will represent their interests in trying to get a mortgage. If the brokerage and its industry professionals are not representing the borrower, but instead are working as a go-between between a lender and the borrower or are working on behalf of the lender, the brokerage and its industry professionals have different responsibilities to the borrower.

Licensed mortgage brokerage professionals need to work through a licensed brokerage. One broker manages each brokerage, and most brokerages also have mortgage associates.

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Responsibilities and Prohibitions of all mortgage brokerage professionals

  • use the personal and brokerage name that appears on their licence. Industry professionals have to use their licensed name, and work only on behalf of their brokerage. They cannot advertise using only a nickname. Industry professionals who work for a team must not advertise or act in a way that makes them appear separate from their brokerage
  • ensure their brokerage name is in all advertising. This helps ensure mortgage brokerage professionals properly identify who they work for
  • ensure all written agreements comply with legislation
  • only pay a service provider or referral fee through the brokerage. Individual professionals cannot personally pay referral fees or service providers, and they cannot pay someone if the referral resulted from activities that require a licence
  • accept payment or referral fees through their brokerage. Individual professionals can only receive compensation through their brokerage. This means a consumer can’t pay an individual real estate professional directly
  • only a brokerage can offer incentives to consumers. Incentives are anything to attract business to the brokerage, such as offers to enter a prize draw, gift cards, or anything of value. Individuals cannot offer their own incentives
  • mortgage professionals can’t provide inducements to consumers except through their brokerage and with their brokerage’s written permission. An inducement is a one-time offer of something of value to close a particular deal, such as an offer to pay legal fees. Individual industry professionals cannot offer their own inducements; they need to provide them through the brokerage

Additional responsibilities and prohibitions

Mortgage Brokerages
When starting to work with a borrower, mortgage brokerages must disclose:

  • the nature of their relationship with the brokerage
  • the nature of the brokerage’s relationship with lenders
  • the range of lenders the brokerage deals with
  • how the brokerage gets paid from the transaction, including any other benefits from lenders
  • any additional fees the borrower might have to pay

Mortgage brokerages must disclose to you and to a lender, in writing, what steps they’ve taken to verify information you and a lender give them, including your identity, your income, your debts, and the lender’s rates, mortgage products, and details. They need to keep copies of supporting documents on file at the brokerage.

A mortgage brokerage cannot offer a lender or investor a guarantee of a mortgage loan.

Mortgage Brokers Must

  • manage the brokerage’s business and its industry professionals. The broker is responsible for the brokerage’s industry professionals and its employees
  • provide the brokerage’s licensees and its employees with policies and procedures to help them understand the brokerage expectations of them
  • review all agreements and mortgage agreements in a timely manner
  • maintain all documents related to relationships with and services provided to consumers (service agreements, mortgage disclosures, emails, credit reports, mortgage applications, etc.). Brokers need to keep records, even records for unsuccessful mortgage applications and deals that didn’t go through
  • hold consumer deposit money (trust money) in accordance with the law, and control access to the trust account. A mortgage broker cannot use trust money for any purpose other than the reason it’s held in trust

Mortgage Associates Must

  • provide their broker with all documents
  • be responsible for any assistants or other employees they hire directly, and ensure they adequately supervise them
  • keep the broker informed of their activities, respond promptly to broker inquiries, and notify the broker as soon as possible if they learn of another associate or employee violating legislation

Additional Resources
Sections 64-70 of the Real Estate Act Rules
Information Bulletin: Responsibilities – Mortgage Broker
Information Bulletin: Responsibilities – Mortgage Associate
Information Bulletin: Responsibilities and Prohibitions – Mortgage Brokerage
Information Bulletin: Prohibitions – Mortgage Brokers and Associates
Consumer Information: Real Estate and Mortgage Assistants
Information Bulletin: Assistants – Mortgage Brokerage
Information Bulletin: Employees
Information Bulletin: Brokers – Accountability
Information Bulletin: Brokers – Active in Management
Information Bulletin: Advertising – Licensed Name
Information Bulletin: Advertising – False and Misleading
Information Bulletin: Advertising – Clearly Indicated
Consumer Information: Protecting Your Information
Information Bulletin: Protection of Client Information
Personal Information and Privacy Act
Personal Information Protection and Electronic Documents Act
Information Bulletin: Referrals – Industry Member Requirements
Information Bulletin: Recommending Service Providers
Information Bulletin: Trust Money Disputes and Disbursements
Consumer Information: Incentives and Inducements
Information Bulletin: Incentives
Information Bulletin: Inducements
Information Bulletin: Disclose – Conflicts of Interest
Information Bulletin: Prohibition – Discourage Legal Advice
Information Bulletin: Prohibition – Fraudulent Unlawful Activity
Information Bulletin: Cost of Credit Disclosure – Mortgage Brokerage
Consumer Information: Mortgage Brokerage Relationship Options
Representing the Borrower Service Agreement
Acting as an Intermediary Service Agreement
Borrower Consent and Disclosure When you Represent a Lender

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Charging fees

In residential and farming operation mortgage deals, a brokerage can only:

  • charge, collect, or attempt to collect a fee after a lender gives written approval they will fund the mortgage
  • the lender has provided a Fair Trading Act Cost of Credit disclosure document (a document that outlines the details of the mortgage: amount, rate, term, payments, dates, etc.)
  • the borrower accepts the agreements

A borrower can agree in writing to reimburse a brokerage for costs related to third-party fees, such as for credit reports, land title searches, couriers, or appraisal services.

Additional Resources
Section 71 of the Real Estate Act Rules
Consumer Information: Cost of Services
Information Bulletin: Cost of Credit Disclosure – Mortgage Brokerage
Consumer Information: Mortgage Brokerage Relationship Options
Representing the Borrower Service Agreement
Acting as an Intermediary Service Agreement
Borrower Consent and Disclosure When you Represent a Lender

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When a mortgage professional has a client who is a lender

Mortgage brokerages need to have a written service agreement when working with a lender client, unless the lender asks to waive this requirement, and the parties agree to waive it in writing.

The agreements must

  • be signed by both parties
  • clearly show the names and responsibilities of each party
  • list the services the brokerage will provide
  • include how long the agreement will last
  • include any loan terms and property descriptions
  • indicate how the agreement can end
  • indicate the risk tolerances of the lender (spelled out clearly in terms of lending amount, types of properties, etc.)
  • the compensation payable to the brokerage and who pays the compensation
  • detail how confidential information will be collected, kept, and distributed
  • indicate if the brokerage holds money in trust for the lender
  • indicate the role of the mortgage broker, if any, if the borrower defaults on the mortgage
  • show the method of communicating any changes (i.e. changes to the lender’s risk tolerance) during an ongoing agreement

Mortgage brokerages must ensure lender clients have a copy of the registered mortgage, a copy of the title for the mortgaged property, a copy of any reports from the lawyer

The above responsibilities in this section do not apply if the client is a bank, other financial institution, or a person who is in the business of providing loans secured with mortgages.

When a mortgage brokerage represents a lender, it is still responsible for ensuring the borrower receives a copy of the Fair Trading Act Cost of Credit Disclosure statement (containing mortgage term, amount, rate, etc.); a copy of the mortgage; a copy of the property title showing the mortgage; any reports from a lawyer; and, a copy of any title insurance or real property report.

Additional Resources
Sections 73, 74 of the Real Estate Act Rules
Consumer Information: Mortgage Brokerage Relationship Options
Borrower Consent and Disclosure When you Represent a Lender

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A mortgage professional acting as a lender or a borrower

Licensed mortgage professionals can act as lenders or borrowers. They can also represent family members, close friends, and associates, but they must disclose, in writing:

  • any interest they have in the transaction (such as being related to the borrower)
  • that they are a licensed mortgage professional
  • their brokerage
  • if there are any negotiations to dispose of the mortgage or their interest in it
  • any information that may affect the completion of a mortgage deal

Additional Resources
Section 75 of the Real Estate Act Rules
Consumer Information: Mortgage Deals with Your Mortgage Brokerage Professional
Information Bulletin: Personal Mortgage Deals
Information Bulletin: Disclose - Conflicts of Interest

 

 

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