Mortgage Brokerages, Lenders and Administrators Act, 2006 - Additional Draft Regulations for Consultation


Mortgage Brokerages,
Lenders and
Administrators Act,
2006

Additional Draft Regulations for Consultation

Proposed by the
Ministry of Finance

This Consultation Draft is intended to facilitate constructive dialogue concerning its contents.

Note that the draft regulations will become law only if the Lieutenant Governor in Council approves them.

January, 2008

Dear Stakeholder:

I am pleased to enclose for your review and comment a copy of Draft Regulations for Consultation proposed under the Mortgage Brokerages, Lenders and Administrators Act, 2006. The new Act will be fully proclaimed on July 1, 2008. The proposed new regulations and proposed amendments to existing regulations will support the implementation of the new regulatory framework.

These proposals are the result of on-going public consultations that were initially launched in June 2004. It has been a successful consultation process and I once again look forward to your input. Your views are important and will assist the government in finalizing the regulatory proposals in this area. The Ministry welcomes suggestions from consumers, businesses, and professionals to help us meet the objective of providing better consumer protection in a way that is fair and practical for individuals and businesses.

The enclosure contains information on how you can comment on these proposals.

Thank you for taking the time to read this consultation draft. Your input is appreciated and will be taken into consideration.

Sincerely,

Wayne Arthurs Signature

Wayne Arthurs
Parliamentary Assistant to the
Minister of Finance

Table of Contents

I. Invitation for Comments

II. Summary of Proposals

1. General
2. Mortgage Brokerages: Standards of Practice
3. Mortgage Administrators: Standards of Practice
4. Mortgage Brokers and Agents: Standards of Practice
5. Administrative Penalties
6. Cost of Borrowing and Disclosure to Borrowers
7. Document Delivery Rules
8. General
9. Proposed amendments to approved regulations

III. Consultation Draft Regulation

1) Mortgage Brokerages: Standards Of Practice
2) Mortgage Administrators: Standards Of Practice
3) Mortgage Brokers And Agents: Standards Of Practice
4) Administrative Penalties
5) Cost Of Borrowing And Disclosure To Borrowers
6) Document Delivery Rules
7) General
8) Exemptions From The Requirements To Be Licensed
9) Mortgage Administrators: Licensing
10) Mortgage Brokerages: Licensing
11) Mortgage Brokers And Agents: Licensing
12) Reporting Requirements For Licensees

IV. Table of Concordance

I. Invitation for Comments

The Ministry of Finance is seeking your views on draft regulations under the Mortgage Brokerages, Lenders and Administrators Act, 2006.

Your views are important and will assist the Ministry in finalizing these regulatory proposals. Interested parties are invited to make written submissions by January 25th, 2008.

Please note that the public comment period has been extended and will now close on February 15, 2008.

You may send comments by mail, fax or e-mail to:

Luba Mycak
Senior Manager
Industrial & Financial Policy Branch
Ministry of Finance
95 Grosvenor Street, 4th Floor
Toronto, ON M7A 1Z1

Tel: (416) 326-9227
Fax: (416) 325-1187

E-Mail: mbconsultations@ontario.ca

This consultation paper can be reviewed online at http://www.fin.gov.on.ca/en/consultations/mortgagebrokers/MBLAA2008.html

A copy of the Mortgage Brokerages, Lenders and Administrators Act, 2006 can be obtained online at www.e-laws.gov.on.ca

Please note that this is a public consultation. All comments received will be considered public and may be used by the Ministry to help evaluate and revise the proposed draft regulations. This may involve disclosing some or all comments or materials, or summaries of them, to other interested parties during and after the consultation.

Any personal information in submissions, such as names and contact details (i.e., home addresses and phone numbers, personal email addresses, etc.) – in addition to any other information that could be used to identify an individual – will not be disclosed without prior consent. However, records created by individuals acting in a professional capacity (i.e., on behalf of a group, association, business, commercial enterprise, etc.) may be disclosed, unless your covering letter states that such disclosure would be harmful and/or prejudicial.

If for any reason you feel your comments should not be shared with other parties, please indicate this in your covering letter.

If you have any questions about this consultation or how any element of your submission may be used or disclosed, please contact Luba Mycak by mail, fax or e-mail as indicated above.

II. Summary of Proposals

1. General

On July 1, 2008, the Mortgage Brokerages, Lenders and Administrators Act, 2006 will come into force and the Mortgage Brokers Act will be repealed. Prior to that, on March 1, 2008, selected provisions of the new Act will come into force to allow brokerages, administrators, brokers and agents to apply for licensing under the new Act. Seven regulations under the new Act have already been approved by the government. The approved regulations are:

  • Exemptions From The Requirements To Be Licensed  (O. Reg. 407/07)
  • Mortgage Administrators: Licensing (O. Reg. 411/07)
  • Mortgage Brokerages: Licensing (O. Reg. 408/07)
  • Mortgage Brokers and Agents: Licensing ( O. Reg. 409/07)
  • Principal Brokers: Eligibility, Powers and Duties (O. Reg. 410/07)
  • Regulated Activities: Additional Prescribed Activities ( O. Reg. 406/07)
  • Reporting Requirements for Licensees (O. Reg. 412/07)

Selected technical amendments to some of these approved regulations are being considered and are described in greater detail below.

As well, additional new regulations will be required to support the proclamation of the Act on July 1, 2008. The following are the proposed new regulations:

  • Mortgage Brokerages: Standards of Practice
  • Mortgage Administrators: Standards of Practice
  • Mortgage Brokers and Agents: Standards of Practice
  • Administrative Penalties
  • Cost of Borrowing and Disclosure to Borrowers
  • Document Delivery Rules
  • General

A brief summary of the proposed new or amended regulations is provided in this consultation package. Readers are encouraged to focus their attention on the actual wording of the consultation draft regulations and not to rely only on this summary.

Please note that the content, structure and form of the draft regulations are subject to change as a result of the consultation process and as a result of review by the government. These proposals would only come into effect if the regulations are approved by the government.

2. Mortgage Brokerages: Standards of Practice

The Ministry consulted on a draft regulation dealing with the standards of practice for mortgage brokerages in November, 2006. The revised draft regulation has been reordered and restructured for greater clarity. A table of concordance between the current draft and the one previously consulted on is included at the end of this document.

The revised draft regulation contains a new requirement for a brokerage to disclose the nature of its relationship with borrowers and lenders. The brokerage would disclose information about whether and when it is acting as a representative of the lender but not the borrower, and information about whether and when it is acting for the borrower but not the lender. In addition to this new disclosure requirement which is set out in the draft regulation, the Ministry is seeking your views about whether to require a further disclosure – a disclosure of information about whether and when the brokerage is acting for both the borrower and the lender.

As well, a brokerage would be required to disclose to a prospective borrower the name of any lender who is a major customer of the brokerage and to disclose the number of lenders on whose behalf the brokerage acted as a representative during the preceding year.

The requirements regarding the administration and reconciliation of trust accounts have also been clarified.

3. Mortgage Administrators: Standards of Practice

This draft regulation sets out the standards of practice that a mortgage administrator must follow. These standards are based on those applicable to mortgage brokerages and are tailored to the activities undertaken by mortgage administrators.

4. Mortgage Brokers and Agents: Standards of Practice

Mortgage brokerages will be required by law to ensure that every mortgage broker or agent who is authorized to deal on their behalf complies with the requirements under the Act, including the brokerage’s standards of practice. Consequently, the mortgage brokers and agents standards of practice do not reiterate those requirements. The draft regulation would require brokers and agents to disclose their licensee name and licence number in public relations materials, provide licensee information on request, and maintain a mailing address and an e-mail address. It also proposes to prohibit mortgage brokers or agents from receiving any fee or remuneration for dealing or trading in mortgages from anyone other than the single brokerage on whose behalf they are authorized to deal or trade in mortgages.

5. Administrative Penalties

This draft regulation sets out rules regarding the general and summary administrative penalties found in sections 39 and 40 respectively of the Act.

6. Cost of Borrowing and Disclosure to Borrowers

This draft regulation describes how the cost of borrowing is to be calculated and disclosed. It also proposes mandatory disclosure requirements and rules about advertisements related to the cost of borrowing. The draft regulation reflects the federal-provincial-territorial harmonization agreement that was created through a process of public consultations and intergovernmental negotiation. The proposals related to mortgage brokers were previously consulted on by the Ministry of Finance in July 2005.

7. Document Delivery Rules

This draft regulation sets out how information and documents are to be delivered or served by the Superintendent.

8. General

This draft regulation sets out the proposed rules regarding the expiry of interim orders. It also sets out the proposed contents of the public register that must be maintained by the Superintendent under the Act.

9. Proposed amendments to approved regulations

Exemptions from the Requirements to Be Licensed (O.Reg. 407/07)

It is proposed that this regulation be amended to exempt certain corporations established by brokers or agents from the requirement to be licensed as a brokerage if specific conditions are met. This exemption would permit the use of corporations by brokers and agents provided that the existence of the corporation does not impede the ability of the mortgage brokerage, its principal broker or the brokers and agents to comply with their duties under the Act. The conditions for the proposed exemption are set out in detail in the draft amendment and include the following:

  • every broker or agent who is an employee or shareholder of the corporation (“member brokers and agents”) would be required to be authorized to deal on behalf of the same mortgage brokerage (“business brokerage”)
  • the corporation would be restricted to dealing or trading in mortgages only for the business brokerage and it would be prohibited from carrying on business as a mortgage lender
  • the corporation would be prohibited from representing to the public that it carries on the business of dealing or trading in mortgages or carries on business as a mortgage lender
  • the member brokers and agents would not be permitted to receive fees or remuneration from any person or entity other than the business brokerage
  • a majority of the corporation’s directors would be required to be member brokers and agents
  • written agreements would be required to be in place between the business brokerage and the corporation, and between the business brokerage and each broker or agent

Mortgage Administrators: Licensing (O.Reg.411/07)

The proposed amendment would require applicants to have a trust account as a condition of licensing.  As well, the amendment includes proposed criteria for the Superintendent to consider when determining whether the surrender of a mortgage administrator’s licence is not in the public interest.

Mortgage Brokerages: Licensing (O. Reg. 409/07)

The proposed amendment provides criteria for the Superintendent to consider when determining whether the surrender of a brokerage licence is not in the public interest.

Mortgage Brokers and Agents: Licensing (O. Reg. 408/07)

Section 15(3)(c) of this approved regulation provides a transitional exemption from the agent education requirements in certain cases provided that the person undertakes as a condition of their licence to successfully complete an approved education program before July 1, 2010. This means the person would have two years after proclamation of the Act within which to complete the educational program. Now that the review of education requirements has been completed by the Financial Services Commission of Ontario, industry associations have indicated that a two year transitional period is not necessary and have urged the government to reduce the transitional exemption period from two years to one year. The proposed amendment would make this change.

Reporting Requirements for Licensees (O. Reg. 412/07)

The draft regulation would replace the one that has been approved. The proposed replacement regulation contains all of the provisions that are in the previously approved regulation but has been expanded to include reporting obligations related to the filing of an annual information return and financial information, as well as the reporting of changes such as address for service and insurance coverage. The administrative penalties for non-compliance with this regulation are also now included.

III. Consultation Draft Regulation

1) Mortgage Brokerages: Standards Of Practice
2) Mortgage Administrators: Standards Of Practice
3) Mortgage Brokers And Agents: Standards Of Practice
4) Administrative Penalties
5) Cost Of Borrowing And Disclosure To Borrowers
6) Document Delivery Rules
7) General
8) Exemptions From The Requirements To Be Licensed
9) Mortgage Administrators: Licensing
10) Mortgage Brokerages: Licensing
11) Mortgage Brokers And Agents: Licensing
12) Reporting Requirements For Licensees

IV. Table of Concordance

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