Survey for CMBA-BC members to solicit feedback

The Provincial government announced on January 17, 2020, that it will be accepting feedback on a consultation to overhaul the Mortgage Brokers Act.  Interested stakeholders are encouraged to provide feedback by the deadline of March 13, 2020.

The modernization of the Mortgage Brokers Act (MBA) is one of the many recommendations set out in the report titled Combatting Money Laundering in BC Real Estate published by the Expert Panel on Money Laundering.

The MBA Consultation begins by stating that the MBA has not kept pace with evolving national and international standards in consumer protection, changes to the industry and emerging issues such as money laundering.  With a new regulatory authority, the opportunity is there to modernize not just the legislation itself, but the methods and tools of enforcement available under the MBA.  However, it appears that the BCFSA is not currently intending a shift to a more principles-based regulatory model, which is often a cornerstone of modern legislation. Instead, the objective of the MBA Consultation is to broaden the scope of licensing requirements, enhance consumer protection, provide for further transparency and disclosure, including enhanced requirements for more complex products, and reduce regulatory gaps. 

Would you please take some time to complete this survey in order to assist us in providing qualitative feedback on this important subject?  You may also send us feedback at the following email address Samanthagale@cmbabc.ca

Thank you!!

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* 1. Your name and status in the industry

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* 2. Inter-provincial activity 

The current definition of “mortgage” is limited to mortgages on real property located in BC. If the intent of the MBA is to ensure all mortgage brokering transactions that include a BC person, or that are carried on in BC, are regulated, should the definition of mortgage be expanded to cover mortgages registered outside of BC?

Do you agree?

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* 3. “Carrying on business” is not defined separately from, but is integral to, the definition of a “mortgage broker.” Modern legislation more clearly provides that persons are within the scope of the legislation and are regulated if they meet a two-part test: 1) the person must be “carrying on business;” and, 2) the business activities must be “mortgage brokering activities” or “mortgage administration activities.” Such a test would provide more clarity than the current MBA, which sets thresholds of either $1,000 or more in fees or lending money on the security of 10 or more mortgages above either of which a person is considered a “mortgage broker.

Do you agree?

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* 4. The MBA does not allow definitions to be expanded to include new business activities as the industry changes without changing the Act. Modern legislation provides the ability to expand the scope of the legislation by regulation. Providing the ability to bring new business activities or ways of doing business by regulation allows the legislative framework to meet the changing needs of consumers and the marketplace in a more timely fashion.

Do you agree?

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* 5. To what extent should private lending be regulated?

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* 6. The Ministry proposes the following licensing categories:

a.       • “mortgage brokerage” – a business entity that is a corporation, partnership or sole proprietorship that brokers mortgages,

b.       • “mortgage administrator” – a corporation that provides administrative services in respect of mortgages, including receiving mortgage payments from borrowers for the benefit of lenders or investors,

c.       • “mortgage associate” – an individual who brokers mortgages on behalf of a mortgage brokerage, and

d.       • “managing mortgage broker” – an individual who brokers mortgages on behalf of a mortgage brokerage and meets criteria to supervise mortgage associates,

Do you agree with these licensing categories and how they are named? Should "mortgage associate" be "mortgage broker"?  

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* 7. Should there also be a separate category for “mortgage lenders”?

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* 8. While statutory obligations and responsibilities could vary by license type, all licensees should be required to apply for a licence, pay an annual fee, and comply with the terms of their license and the legislation.

Do you agree?

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* 9. Should the licence renewal period be:

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* 10. Who should be exempt from licensing requirements? Please provide some comments on how exemptions should work for 1) bank employees who broker mortgages with third party lenders 2) bank reps 3) lawyers/notaries 4) realtors 5) others

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* 11. Do you have any concerns with matching modern mortgage legislation to include a duty to act fairly, honestly and in good faith?

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* 12. Should a positive obligation on mortgage brokers to require reporting misconduct by other brokers be legislated?

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* 13. Is there any reason why E&O insurance should not be required?

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* 14. Would you like mortgage brokers be included in the “Real Estate Errors and Omissions Insurance Corporation program, which provides E and O coverage to BC’s real estate industry?

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* 15. According to the Ministry, acting in the best interest of a borrower means a broker must:

• verify the identity of the borrower, lender or private investor and determine the suitability of mortgage products available to the borrower by taking into account specified factors, including the interest rate, term, amortization period and any other distinguishing features of the mortgage,

• provide information about the brokerage business that a borrower may want to consider in their dealings with the brokerage, including ownership by a mortgage lender or private lender, the name and number of lenders they work with, the fees and remuneration or penalties payable by the borrower,

• disclose all direct or indirect compensation receivable by the brokerage from others, or payable by the brokerage if the borrower enters into the specific mortgage.

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* 16. Is there information that should or should not be included in disclosures to borrowers?

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* 17. In many cases, mortgages are taken out against residential properties for business or investment purposes – in these cases, fee restrictions and cost of credit disclosure does not apply as the trigger for the requirements is whether the transaction is for a consumer purpose. The Ministry asks whether “there is a reason why disclosure of the cost of borrowing should not be required in every instance where an individual takes out a mortgage secured against residential property?” However, such a rule change may impact private residential mortgages taken out for investment or business purposes.  Should we simplify rules here and base fee restrictions and cost of credit disclosure on whether a property is residential or commercial?

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* 18. What are the benefits and costs of requiring independent legal advice before taking out a reverse mortgage?

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* 19. What is an appropriate extended cooling off period for reverse mortgages?

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* 20. Should disclosure of the effects of an interest rate change on the mortgage balance be required for reverse mortgages?

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* 21. Are there other disclosures or requirements that could better protect reverse mortgage consumers not contemplated here?

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* 22. Should the mortgage broker duty to a private investor include determining mortgage investment suitability?

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* 23. Should the disclosure to lenders of potential conflict of interests be limited and only required if the lender is a private investor?  eg. no Form 10 to bank lenders.

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* 24. What are the expected impacts to mortgage brokerages in requiring audited financial statements in place of an accountant’s report on trust funds.

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* 25. The MBA provides the Registrar with enforcement powers to take effective action against non-compliant mortgage brokers. Specifically, the Registrar may investigate, summon witnesses, and inspect the affairs and records of a person and may:

• suspend or cancel a registration;

• issue orders requiring a person to take specified actions;

• levy administrative penalties of up to $50,000;

• issue cease and desist orders and

• enforce orders by filing them with the courts.

Mortgage brokers and submortgage brokers are generally entitled to a hearing before these powers are enforced. A person affected by a direction, decision or order of the Registrar is entitled to be heard and can make an appeal to the Financial Services Tribunal. The Tribunal’s decisions are final, but subject to judicial review. The maximum dollar amount of administrative penalties imposed to deter non-compliance in other consumer protection statutes have been substantially increased. For example, the Real Estate Services Act maximum administrative penalty was increased from $20,000 to $500,000 for brokerages and from $10,000 to $250,000 in any other case.

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* 26. Other comments

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