The Ontario government has introduced new legislation to replace the 30-year-old Mortgage Brokers Act. When it is passed, the Mortgage Brokerages, Lenders and Administrators Act of 2006 will provide a comprehensive regulatory framework covering four separate aspects of the mortgage business, namely: dealing in mortgages, trading in mortgages, lending money with real estate as security and administering mortgages.
With certain exceptions, such as financial institutions that are already highly regulated, all individuals or companies that deal in mortgages must get one of four new types of licences from Ontario’s Superintendent of Financial Services: a brokerage licence, a mortgage administrator’s licence, a mortgage broker’s licence or a mortgage agent’s licence.
Currently, only mortgage brokers are required to be licensed.
“We need updated rules and modernized practices for our increasingly sophisticated financial services marketplace. Not only will the new act benefit consumers, but it will also support a new generation of economic growth,” Ontario Finance Minister Dwight Duncan said in a news release.
The new act will also provide enforcement tools, such as the authority to issue compliance orders and the power to freeze assets, as well as the power to impose administrative penalties up to $25,000 against a brokerage or mortgage administrator, and up to $10,000 against brokers and agents.
An individual’s conviction of an offence under the new act will carry a fine of up to $100,000 or up to a year in jail, or both. For a corporation, the maximum penalty would be a $200,000 fine.
The new act will require new qualifications for practising as a mortgage broker or agent, and remove the automatic mortgage broker status for real estate brokers. It will also cancel the foreign-ownership restrictions the current act imposes on mortgage brokers.
It is not clear when the new act will be proclaimed into law. A spokesman for the Ministry of Finance says consultations are taking place concerning the wording of the regulations. When they are ready, they will be released publicly. Only then will third reading take place in the legislature.
“The new legislation is something we’ve been involved with for the past few years,” says Jim Murphy, senior director of government relations and communications for the Canadian Institute of Mortgage Brokers and Lenders. “As with anything, the devil is in the details. Many specifics, such as disclosure and continuing education requirements, will be left to regulation. Obviously, we want to be a part of that.
“[CIMBL] strongly supports the raising of the bar — increased professionalism — which the government is trying to get from this new legislation,” he adds. “We support continuing education and mandatory errors and omissions insurance. It’s not mandatory now, but many mortgage brokers have it.”
Other provinces will probably follow Ontario’s lead, Murphy says. “Quebec and British Columbia are reviewing their current regulatory environments. It all speaks to growth in the industry.”
Like Ontario’s, B.C.’s laws are more than 30 years old.
Quebec’s brokers are currently licensed with the real estate industry, Murphy says. “We are working with the government there. It’s going through a review of the mortgage industry that will lead to legislation.”
Alberta’s industry is unique because it is self-regulating, Murphy says: “It can pass its own bylaws. It doesn’t have to go to the government to seek regulatory change. It will probably remain self-regulating, but it’s looking at amendments such as those in Ontario.”
Saskatchewan and Manitoba have no legislation, but Saskatchewan will probably introduce legislation soon, Murphy adds.
A recent CIMBL study states that in mid-2005 the total mortgage credit outstanding in Canada was $617 billion. Of that, $300 billion was in Ontario. Between a quarter and a third of these amounts was placed by mortgage brokers. IE
New law for Ontario mortgage brokers
Legislation will require anyone who deals in mortgages to be licensed
- By: John Jaffey
- March 6, 2006 March 6, 2006
- 15:34