Mortgage Brokerage - Representing the Lender
A mortgage brokerage may only represent either the lender or borrower where the lender is not a bank, treasury branch, credit union, loan corporation, trust corporation, insurance company, any person engaged in the business of making loans secured with mortgages or any person that manages registered pension plans. 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 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:
- treat the borrower honestly and act with reasonable care and skill
- gather information on the property the borrower wants to finance and the borrower’s financial situation
- explain the lender’s options to the borrower
- complete the necessary documents and submit them to the lender
- inform the borrower about the transaction’s progress and any communications to them from the lender
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 Borrower Consent & Disclosure When You Represent the Lender form 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 form 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.