Mortgage Brokerage - Representing the Borrower

A mortgage brokerage may only represent either the lender OR the borrower but not both, when the lender is a “private” lender. Lenders that are not considered “private” include banks, treasury branches, credit unions, loan corporations, trust corporations, insurance companies, any persons engaged in the business of making loans secured with mortgages or any persons that manage registered pension plans. In these situations, the mortgage brokerage cannot represent both parties. The inherent conflicts identified previously in this information bulletin in acting as an agent for two parties to the same transaction requires that the brokerage only act on behalf of the borrower or the lender.

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.

Mortgage brokerages are cautioned that their industry members must only undertake activities that match the type of relationship the brokerage has chosen to have with lenders and/or borrowers. For example, if a mortgage brokerage business model is to act as an intermediary, an advertisement that indicates “we ensure borrowers get the best mortgage rate” may be false and/or misleading, as it could lead a borrower to believe that the mortgage brokerage is working on his or her behalf. Appropriate wording could be “we work with borrowers to provide appropriate options for their consideration.”

RECA has developed a Representing the Borrower Service Agreement to assist brokerages in making the relationship and compensation disclosures to borrowers, and to meet the requirements of section 43 of the Real Estate Act Rules. This agreement will also assist borrowers in understanding their relationship with mortgage brokerages and the mortgage broker’s relationship with lenders, and how the brokerage will be compensated.