Mortgage Brokerage Relationship Options

Purpose:  This bulletin explains the relationship options mortgage brokerages can have with borrowers and lenders and the requirement to clearly explain their role to borrowers and lenders.

This bulletin applies to mortgage brokerages, brokers and associates.

Clearly explain your role and working relationships in a transaction
Clients often do not understand their relationship with their mortgage brokerage, the role of the brokerage, or the relationship their brokerage may have with lenders. You must make sure that everyone involved in a mortgage transaction understands your role, why you have to do certain things, and who you represent.

Acting as an agent
When you agree to act for someone else, you become the agent for that person.

Your brokerage may choose one of three relationship options
Your mortgage brokerage may choose one of the following relationship options:

Depending on the situation, your brokerage may have different relationships with different lenders and borrowers. Each relationship carries different roles and obligations.

When you act for the lender
When your mortgage brokerage represents the lender, you must act in the lender’s best interests at all times. Your brokerage will owe general, fiduciary, and regulatory obligations to the lender. You must not act for a borrower when you act for a lender in the same mortgage deal.

You may treat the borrower as your customer. The Real Estate Act Rules (Rules) considers a customer as a person who contacts an industry professional but does not engage or employ them to deliver services to the customer. When the borrower is a customer, you must:

When you act for the borrower
When your mortgage brokerage represents the borrower, it must act in the borrower’s best interests at all times. Your brokerage will owe general, fiduciary, and regulatory obligations to the borrower. Your brokerage will recommend financing options to the borrower, advocate on their behalf, and provide them with confidential advice.

You must treat the lender honestly and act with reasonable care and skill.

When you act as an intermediary between the lender and borrower
When your mortgage brokerage is not representing the lender or the borrower, it can act as an intermediary between them, offering mortgage products from multiple lenders to the borrower.

When dealing with the borrower as an intermediary, you must:

When dealing with the lender as an intermediary, you must:

You cannot represent the lender and borrower at the same time
Do not try to represent both the lender and the borrower in the same transaction. When you try to represent the lender and borrower at the same time, it is impossible to meet your obligations, to be loyal, and act in their best interests. This will put you in a conflict of interest, particularly when disclosing relevant information and keeping other information confidential.

You must explain your relationships to borrowers
Make sure all borrowers you work with, either as clients or customers, understand their relationship to your brokerage and its mortgage professionals. This applies to whatever relationship option you choose.

RECA has created sample service agreements and explanation sheets to help mortgage brokerage professionals explain these relationships to borrowers. If you use these documents, you will meet the disclosure requirements in section 65(c)(i)(ii) of the Rules. These sample agreements are available on the Relationship Forms page within RECA’s website, www.reca.ca.

Related information

Legislation

Real Estate Act Rules - sections 41(e) and 65(c)(i)(ii)

Information bulletins

Tools

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