Mortgage Brokerage Tips

Buying or selling a property is probably one of the most important financial decisions a consumer will make in their lifetime. Take a moment to learn about the mortgage industry and consider the type of working relationship you might enter into with a licensed mortgage broker. The more you know and understand, the more likely it is you will be satisfied with the results.

If a licensed mortgage broker has a direct or indirect interest in your mortgage transaction, they must provide you with a number of disclosures and they can’t represent you.

Imagine you’ve hired a mortgage broker to help find you a lender and obtain a mortgage. Your credit rating isn’t great, and the process isn’t going well. So your mortgage broker comes up with a solution: they have some investment money and they want to lend it to you, this would make the mortgage brokerage professional your lender.

Win-win, right?  Maybe.

If the licensed mortgage broker you’re working with becomes involved in your mortgage deal, either directly or indirectly, they need to provide you with a number of disclosures because of the conflict of interest that arises. The deal can still happen, but you must be made aware of the facts.

What is direct and indirect interest?

Direct interest: when a mortgage brokerage professional is personally involved in the mortgage deal.

Indirect interest: when a mortgage brokerage professional is related to, or has a personal relationship with a person involved in the mortgage deal. An indirect interest has the same disclosure requirement as a direct interest.

There is a conflict of interest. Now what?

If a mortgage broker becomes directly or indirectly involved in your mortgage deal, they must disclose the following in writing to you at the earliest practical opportunity:

  • the interest, either direct or indirect, that they have in the transaction
  • that they are authorized under the Real Estate Act
  • the brokerage they are registered with
  • the complete details of any negotiations for a further disposition of the mortgage or their interest in it (i.e. do they plan to pass on the mortgage to another lender for a profit)
  • any information the professional has that could materially affect the acceptance, issuance, sale or purchase of the mortgage

Because they would be involved in your mortgage deal, they can no longer act as your representative, which means they can no longer provide advice. The deal can go forward if all parties agree, but the mortgage broker will no longer be representing your interests. You may want to get seek out representation from a different licensed mortgage broker or speak with a lawyer.

I’ve received the disclosures and now I’m not comfortable going forward

As long as you have not signed a mortgage commitment, you can choose not to proceed at any time. If you aren’t comfortable with the conflict of interest that arises after you have already signed a mortgage commitment, you should seek independent legal advice.

Mortgage industry assistants often handle daily administration details, leaving industry members free to engage in activities requiring a licence.

Assistants aren’t licensed by the RECA and are not part of our jurisdiction. However, RECA holds an associate and/or the broker responsible for an assistant’s activities. For example, Real Estate Act Rule requirements state an industry member must provide supervision and ensure the public has full knowledge the assistant is unlicensed.

Limited Responsibilities

Industry members can’t assign duties to the assistant that require a licensed professional. While an assistant can organize an industry member’s appointments, they can’t:

  • personally complete mortgage applications
  • conduct contract negotiations
  • offer advice to clients
  • sign contracts on behalf of the brokerage

It’s important to note that consumers dealing with unlicensed assistants conducting these types of activities aren’t protected by the Real Estate Act.

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