Part 2 - Industry Standards of Practice

Division 3 - Mortgage Brokerage Standards

Definition

64 This Division applies to all classes of mortgage brokers and a reference to a brokerage includes a mortgage brokerage, broker and associate.
Oct 1/06

Mortgage Brokerage Responsibilities
65 A mortgage brokerage must:
(a) only deal in mortgages, as the case may be, in the name that appears on the brokerage’s licence;
(b) ensure the name of the brokerage is clearly indicated in the course of dealing in mortgages, including any related advertisements; and
(c) disclose to borrowers in writing:
  (i) the nature of its service relationship with the borrower;
  (ii) the nature of its relationship with the lender;
  (iii) the range of lenders whose products it offers;
  (iv) how it will be compensated for the transaction;
  (v) the nature of any other monies or benefits it will receive from the lender and the factors that influence payment of any additional monies or benefits; and
  (vi) any additional fees payable by the borrower.
Oct 1/06

Mortgage Brokerage Prohibitions
66    A mortgage brokerage must not:
  (a) employ, permit or engage a broker or associate registered with another brokerage to deal in mortgages in its name or on its behalf, directly or indirectly, as the case may be;
  (b) employ a person to deal in mortgages unless that person meets the requirements of the Act, Regulations, Rules, and Bylaws, and all levies, fees, premiums, fines, administrative penalties and other amounts that are payable under or pursuant to the Act, Regulations, Rules, Bylaws or under any predecessor enactments in respect of that person have been paid;
  (c) pay a commission or other remuneration, directly or indirectly, in connection with a mortgage dealing except:
    (i) to a broker or associate employed by the brokerage or to not more than one corporation of which that broker or associate, as the case may be, owns not less than fifty percent (50%) of the shares issued by that corporation;
    (ii) to a brokerage that is licensed under these Rules or under similar legislation in a jurisdiction outside of Alberta; or
  (d) pay, offer to pay, agree, or allow to be paid a referral fee or any remuneration to a person in relation to dealing in mortgages if the person is required to be licensed in relation to those services but is not licensed;
  (e) pay a commission or other remuneration directly or indirectly in connection with a dealing in mortgages to a brokerage that is licensed under these Rules or under similar legislation in a jurisdiction outside of Alberta when the brokerage has knowledge that the commission or remuneration will be paid to or shared with a person who is required to be licensed in relation to those services but is not licensed.; or
  (f) offer a lender or investor a mortgage loan guarantee either on behalf of itself or on behalf of any other industry member.
Oct 1/06, Resolution 2010-1

Mortgage Broker Responsibilities
67(1) A mortgage broker must:
  (a) be actively engaged in the management of the mortgage brokerage with which the broker is registered;
  (b) deal in mortgages only in the name that appears on the individual’s licence and in the name of the brokerage with which the broker is registered;
  (c) ensure the name of the brokerage is clearly indicated in the course of dealing in mortgages, including any related advertisements;
  (d) provide all industry members of the brokerage and other personnel with written policies and procedures by which they are expected to operate, including written policies and procedures for personal deals;
  (e) ensure the business of the brokerage is carried out competently and in accordance with the Act, the Bylaws, and these Rules;
  (f) ensure there is an adequate level of supervision for associates within the brokerage and employees who perform duties on behalf of the brokerage;
  (g) ensure that for all monies held in trust, the bank records are maintained in accordance with the Act, the Bylaws, these Rules and the law as it relates to trustees;
  (h) ensure adequate control over any access to an automated bank machine (“ABM”) or ABM cards used for electronic deposits and transfers and any access codes used for Internet banking or ABM cards;
  (i) ensure proper management and control of documents or records related to licensing, registrations and related regulatory requirements;
  (j) ensure all documents and records related to deals in mortgages required under the Act and these Rules are maintained or made available by the brokerage for the purposes of a review at the registered business office of the brokerage; and
  (k) review all mortgage agreements in a timely manner.
67(2) When a mortgage broker does not have a controlling interest in the ownership of the mortgage brokerage, the broker must have a written agreement with the brokerage giving the broker authority to carry out the duties and responsibilities of a broker under these Rules.
67(3) A mortgage broker is accountable for the conduct of an associate or employee, as the case may be, if the broker:
  (a) was not actively involved in the management of the brokerage;
  (b) failed to ensure an adequate level of supervision was in place for the associate or employee, as the case may be;
  (c) was wilfully blind to the conduct of the associate or employee, as the case may be;
  (d) was a participant in the misconduct;
  (e) had knowledge of the misconduct of the associate or employee, as the case may be, and failed to take reasonable steps to stop such misconduct;
  (f) upon becoming aware of the misconduct failed to take reasonable steps to correct the misconduct or reduce any harm that may have resulted from the misconduct; or
  (g) failed to notify the executive director upon becoming aware of misconduct relating to fraud, deception, theft, or unlawful activities on the part of the associate or employee.
    Oct 1/06

Delegation by Broker
68(1) A mortgage broker may delegate the broker’s duties and responsibilities to another industry member associated with the mortgage brokerage if:
(a) the delegate is registered with the brokerage and is qualified to carry out the responsibilities;
(b) the particulars of the delegation of responsibilities by the broker to the delegate are clear and in writing, and are agreed to and understood by the broker and the delegate;
(c) the particulars of the delegation are communicated to the employees and associates, as the case may be; and
(d) the broker has a system in place to monitor the delegate and verify that adequate supervision is being maintained.
68(2) In the event a mortgage broker delegates the broker’s duties and responsibilities to a delegate, the broker remains accountable for the conduct of the delegate and all associates or employees of the brokerage.
Oct 1/06

Mortgage Associate Responsibilities
69 A mortgage associate must:
(a) deal in mortgages only in the name that appears on that individual’s licence and in the name of the mortgage brokerage with which that individual is registered;
(b) ensure that all dealings in mortgages and the relevant documentation meet legislative requirements found under the Act, Regulations, Rules, and Bylaws;
(c) provide to the broker in a timely manner all original documentation and copies of original documents provided to the parties or maintained by other brokerages:
  (i) related to dealings in mortgages; and
  (ii) required under the Act and these Rules;
(d) keep the broker informed of the activities being performed by the associate on behalf of the brokerage;
(e) ensure there is an adequate level of supervision for his employees and others who perform duties on his behalf;
(f) respond promptly to any inquiry that is addressed to him by the broker; and
(g) notify the broker upon learning of a violation of the Act, Regulations, Rules, or  Bylaws by any broker, associate or employee associated with a brokerage.
Oct 1/06

Mortgage Broker and Associate Prohibitions
70(1) A mortgage broker or associate, as the case may be, must not:
(a) deal in mortgages on behalf of a brokerage other than the brokerage with which he is registered;
(b) promise to pay or pay a commission or other remuneration, directly or indirectly, to any person resulting from or in connection with a dealing in a mortgage except through the brokerage with which he is registered;
(c) accept a commission, referral fee or other remuneration, directly or indirectly, for dealing in a mortgage from any person except the brokerage with which he is registered; or
(d) directly or indirectly, advertise, communicate or offer to any person an incentive except an incentive that is provided by and on behalf of the brokerage with which he is registered.
70(2) A mortgage broker or associate, as the case may be, must not directly or indirectly, provide an inducement unless the inducement is provided by and on behalf of the brokerage with which the mortgage broker or associate is registered, details of the inducement are provided in writing and the broker has provided written approval.
Oct 1/06

Collection of Fees
71(1)   Subject to section 71(2), a brokerage must not charge, collect or attempt to collect a fee from a person for assisting the person in obtaining a mortgage from a lender until the following conditions have been met:
  (a) the lender has provided a written confirmation to fund the mortgage, accepted by the borrower and the commitment has been provided to the borrower or the borrower’s associate; and
  (b) the lender or the lender’s agent has provided the person with an initial disclosure statement and at least two business days have passed since the initial disclosure statement was received by the person or the person has waived the time period for delivery in accordance with the Fair Trading Act.
71(2) Section 71(1),
  (a) only applies to a mortgage where the person is an individual who enters into a credit arrangement primarily for personal, family, or household purposes; and
  (b) does not apply to actual fees disbursed by the brokerage to third parties for credit reports, Alberta Registries, courier and appraisal services if a written agreement exists between the brokerage and the person where the person agrees to compensate the brokerage for these costs.
Oct 1/06

Verification of Information Disclosure
72(1) A brokerage must disclose in writing to the parties to the deal in mortgages what steps, if any, have been taken by the brokerage to verify the information obtained or supplied by the brokerage to the parties, including information contained in the mortgage application, other representations made by the borrower or lender and the identity of the parties to the deal in mortgages.
72(2) A brokerage must maintain copies of supporting documentation in regard to the specific verification outlined in section 72(1) in the brokerage file.
  Oct 1/06

Obligations to a Lender Client
73(1) Mortgage brokerages that represent lenders in a mortgage deal must enter into written service agreements with lender clients.
73(2) Every service agreement must:
(a) be signed by the relevant parties; and
(b) clearly show all terms and conditions of the agreement, which must include:
  (i) the names of the parties to the agreement;
  (ii) the responsibilities of each party to the agreement;
  (iii) the services to be provided by the mortgage brokerage;
  (iv) the duration of the agreement;
  (v) the loan terms, property description details and analysis;
  (vi) the provisions for terminating the agreement;
  (vii) the risk tolerances of the lender, respecting priority on title, ratio of loan to property value, nature and type of the property used as security for the loan, costs and outcomes associated with foreclosures, and source of loan capital;
  (viii) the amount or method of calculating the remuneration to be paid by the lender;
  (ix) the process for the collection, use, safekeeping and distribution of confidential and personal information;
  (x) if the brokerage is expected to hold trust funds, the terms of trust;
  (xi) if the agreement is of an ongoing basis, the method for communicating loan possibilities and property details to the lender and the lender’s response to same;
  (xii) if the agreement is of an ongoing basis, the method of communicating changes to the lender’s risk tolerances; and
  (xiii) the role of the mortgage broker, if any, in the event the borrower defaults on the mortgage deal.
73(3) Mortgage brokerages that represent lenders in a deal must ensure that the lender is provided with:
(a) a copy of the registered mortgage;
(b) a copy of the certificate of title for the property affected by the mortgage;
(c) a copy of the solicitor’s report, if any, with respect to the registration and the effect of the transaction.
73(4) Every mortgage broker that represents a lender in a deal in mortgages must ensure that the lender complies with the written disclosure requirements to be provided to the borrower pursuant to the Fair Trading Act.
73(5) A prospective client may waive the requirements outlined in sub-sections (1) and (3) if the waiver request originates with the prospective client and is in writing.
73(6) Sub-sections (1), (2), (3) and (4) do not apply if the lender is a bank, treasury branch, credit union, loan corporation, trust corporation, insurance company or any person engaged in the business of making loans secured with mortgages.
73(7) Sub-section (3) does not apply if the lender has retained legal counsel and the lender’s legal counsel has undertaken these activities on behalf of the lender.
  Oct 1/06

Delivery of Documents
74(1) Where the brokerage directly represents the lender in its dealings with the borrower, a brokerage must provide the borrower:
(a) prior to the mortgage commitment being agreed to by the borrower, a copy of the disclosure statement pursuant to the Fair Trading Act; and
(b) as soon as practical after funding, a copy of:
  (i) the registered mortgage;
  (ii) the certificate of title for the property affected by the mortgage;
  (iii) the solicitor’s report, if any, with respect to the registration and the effect of the transaction; and
  (iv) any title insurance or real property report obtained.
74(2) The requirements listed in sub-section (1)(b) above apply only if the borrower has not already received this information.
Oct 1/06

Personal Mortgage Deals
75 An industry member dealing in mortgages on the industry member’s own behalf, either directly or indirectly, must disclose in writing to the borrower, lender, vendor or purchaser of the mortgage, as the case may be:
(a) any interest, direct or indirect, that the industry member has in the transaction;
(b) that the industry member is authorized under the Act;
(c) the name of the brokerage with which the industry member is registered;
(d) complete details of any negotiations for a further disposition of the mortgage or the industry member’s interest in it; and
(e) any information within the knowledge of the industry member that could materially affect the acceptance, issuance, sale or purchase of the mortgage.
Oct 1/06


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