A Consultation Draft

MORTGAGE BROKERAGES, MORTGAGE LENDERS AND MORTGAGE ADMINISTRATORS ACT
A Consultation Draft

Proposed by the Ministry of Finance
March, 2005

This Consultation Draft is intended to facilitate constructive dialogue concerning its contents.
Note that it will only become law if the Legislative Assembly passes the legislation.

Dear Stakeholder:

I am pleased to enclose for your review and comment a copy of Mortgage Brokerages, Mortgage Lenders and Mortgage Administrators Act: A Consultation Draft which proposes to revise and replace the Mortgage Brokers Act. I also include draft licensing regulations for your review and comment.

In the 2004 Ontario Budget, the government made a commitment to review the Mortgage Brokers Act with a view to introducing a bill to replace the Act in 2005. A consultation paper titled Improving the Mortgage Brokers Act was released in June 2004 and public comment was invited on ways to improve consumer protection, streamline regulatory approaches, ensure cost-effective regulation, and harmonize with other regulatory bodies and jurisdictions where appropriate. The enclosed document is the result of those public consultations held in the summer and fall of 2004.

Your views are important and will assist the government in finalizing legislative and 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. I very much appreciate your input.

Sincerely,
signature of Mike Colle
Mike Colle
Parliamentary Assistant to the Minister of Finance

TABLE OF CONTENTS

  1. INVITATION FOR COMMENTS
  2. SUMMARY OF PROPOSALS
    1. General
    2. Regulated Activities
      Dealing in Mortgages

      Trading in Mortgages
      Carrying on Business as a Mortgage Lender
      Carrying on Business as a Mortgage Administrator
      No Deemed Licensing of Real Estate Brokers
    3. Licences
      Brokerages and Mortgage Administrators
      Mortgage Brokers and Agents
      Principal Broker
    4. Licensing Process
      Initial Application and Renewals

      Notice of Proposal
      Automatic Suspension and Surrender
    5. Administration and Compliance
    6. Enforcement
    7. Offences
    8. Disclosure of Cost of Borrowing
  3. PROPOSED REGULATIONS
        Licensing Requirements for Brokerages
        Licensing Requirements for Mortgage Administrators
        Licensing Requirements for Mortgage Brokers
        Licensing Requirements for Mortgage Agents
  4. OTHER MATTERS
        Syndicated Mortgages
        Education Review
        Practice Standards
  5. CONSULTATION DRAFT - LEGISLATION
  6. CONSULTATION DRAFT - LICENSING REGULATIONS

I. INVITATION FOR COMMENTS

The Ministry of Finance is seeking your views on Mortgage Brokerages, Mortgage Lenders and Mortgage Administrators Act: A Consultation Draft and a draft of related licensing regulations. Many of the proposals contained in these documents are based on feedback to the ministry's consultation paper Improving the Mortgage Brokers Act, released in June 2004.

This guide gives readers a brief outline of changes under consideration. The accompanying consultation draft contains detailed wording of the proposed legislation. The proposals are intended solely for discussion purposes and would only become law if the Legislative Assembly passes such legislation. Readers are encouraged to focus their attention on the actual wording of the consultation draft and not rely only on this guide.

This guide also identifies areas under consideration for regulations which could be proposed under a new act. It does not include detailed information about the proposed content of the remaining regulations under the new act. The ministry will consult on other proposed regulations at a later date.

Your views are important and will assist the ministry in finalizing these legislative proposals. The Ministry of Finance invites your comments on the issues outlined in this consultation draft. Interested parties are invited to make written submissions by April 29, 2005.

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

Mortgage Brokerages, Mortgage Lenders and Mortgage Administrators Act: A Consultation Draft
Mike Colle
Office of the Parliamentary Assistant to the Minister of Finance
c/o Industrial & Financial Policy Branch
Ministry of Finance
777 Bay Street, 10th Floor
Toronto, ON M5G 2C8

Fax: (416) 327-0941

E-Mail: mikecolle.mbconsultations@fin.gov.on.ca

This consultation paper can be reviewed online at http://www.fin.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 legislation and 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.

Therefore, 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
Senior Manager
Industrial & Financial Policy Branch
Ministry of Finance
777 Bay Street, 10th Floor
Toronto, ON M5G 2C8

Tel: (416) 326-9227
Fax: (416) 327-0941

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II. SUMMARY OF PROPOSALS

1. General

It is proposed that the Mortgage Brokerages, Mortgage Lenders and Mortgage Administrators Act would replace the Mortgage Brokers Act. The new name of the act would more clearly describe the activities that are regulated under the proposed legislation.

The content, structure, and form of the draft legislation and regulations are subject to change as a result of the consultation process and as a result of review by the government. These proposals will only become law if they are passed by the Legislative Assembly.

The Superintendent of Financial Services (the "Superintendent") would continue to have statutory powers and duties under the new act. The Financial Services Tribunal (the "Tribunal") would continue to have an adjudicative role. The Minister of Finance would continue to be responsible for the new act.

Consistent with the current Act, the consultation draft would apply to mortgages within the meaning of the Mortgages Act. The consultation draft makes no specific reference to "reverse mortgages" because a reverse mortgage is a type of mortgage and therefore already covered by any reference to a mortgage. However, consideration will be given to whether the regulations should provide for any specific disclosure or other requirements regarding reverse mortgages.

2. Regulated Activities

The consultation draft proposes that the following activities be subject to licensing and the regulatory oversight of the Superintendent: dealing in mortgages, trading in mortgages, carrying on business as a mortgage lender, and carrying on business as a mortgage administrator. For each of these activities it is proposed that regulations prescribe exemptions from the licensing requirements. It is anticipated that these and other draft regulations will be available for public comment at a later date. Suggestions regarding the licensing exemptions prior to the release of the draft regulations are welcome.

Dealing in Mortgages

It is proposed that "dealing in mortgages" encompass the following services: soliciting a person to lend or borrow money on the security of a mortgage, negotiating or arranging a mortgage on behalf of another person, or helping another person enter into a mortgage. The regulations may prescribe other services that would constitute dealing in mortgages.

Only corporations, partnerships, or sole proprietors would be able to carry on the business of dealing in mortgages in Ontario. Unless specifically exempted from the licensing requirement, they would be required to obtain a brokerage licence.

Individuals who deal in mortgages would be required to obtain a mortgage broker's or agent's licence and could only act on behalf of one licensed brokerage.

The proposed legislation sets out several exemptions from the requirement to be licensed for those who deal in mortgages. For example, it is proposed that financial institutions, and directors, officers, or employees of financial institutions be exempt from the licensing requirement. The consultation draft defines a financial institution as a bank or authorized foreign bank, a credit union or caisse populaire, a league, an insurer, a loan or trust corporation, or a retail association.

An exemption from the requirement to have a mortgage broker's or agent's licence is proposed for directors, officers, and employees who deal in mortgages on behalf of a corporation, partnership, or sole proprietor that does not itself carry on the business of dealing in mortgages.

It is also proposed that lawyers be exempt from the licensing requirements if they negotiate or arrange a mortgage or assignment of a mortgage, or help another person enter into a mortgage, where those services constitute legal services.

Simple referrals to a source of mortgage financing would be exempt from licensing requirements if the referring person or entity does not deal in mortgages or engage in an activity that requires licensing under the proposed act.

Regulations may also prescribe other persons who would be exempt from licensing requirements.

Trading in Mortgages

The consultation draft provides that licences would be required for trading in mortgages. Trading in mortgages would include soliciting another person to trade in mortgages, or buying, selling, or exchanging mortgages on behalf of another person or one's own behalf.

Only corporations, partnerships, or sole proprietors would be able to carry on the business of trading in mortgages in Ontario and they would be required to obtain a brokerage licence.

Individuals who trade in mortgages would be required to obtain a mortgage broker's or agent's licence and could only act on behalf of a licensed brokerage.

An exemption from the requirement to have a brokerage licence is proposed where a person solicits and executes trades in mortgages through a licensed mortgage brokerage or through a person exempted from the requirement to have a brokerage licence.

It is proposed that financial institutions, and directors, officers, or employees of financial institutions be exempt from the licensing requirements.

Lawyers would also be exempt from the licensing requirements if their trading in mortgages constitutes providing legal services. This exemption would not apply in respect of lawyers buying, selling, or trading mortgages on their own behalf.

Regulations may prescribe other exemptions from the licensing requirements.

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Carrying on Business as a Mortgage Lender

It is proposed that a brokerage licence be required for those who carry on the business of lending money on the security of real property in Ontario. Financial institutions would be exempt from the licensing requirement.

Only corporations, partnerships, or sole proprietors would be able to carry on business as mortgage lenders in Ontario and they would be required to obtain a brokerage licence.

Lenders would not be required to have a brokerage licence if they use an intermediary that is either a licensed brokerage or a person exempt from licensing under the act. The regulations may also prescribe other persons who carry on business as mortgage lenders to be exempt from licensing requirements.

Individuals who solicit, negotiate and arrange, or trade in mortgages on behalf of a lender, would be “dealing in mortgages” or “trading in mortgages” on behalf of the lender and therefore required to be licensed as a mortgage broker or agent.

Carrying on Business as a Mortgage Administrator

Under the proposed act, those carrying on the business of mortgage administration would require a licence. Mortgage administration would constitute collecting money payable under a mortgage on behalf of another person or providing other services that may be prescribed.

Only corporations, partnership or sole proprietors would be permitted to carry on business as a mortgage administrator in Ontario and they would be required to obtain a mortgage administrator's licence. Employees of licensed mortgage administrators would not be required to be licensed unless these persons are dealing or trading in mortgages.

Financial institutions would be exempt from the licensing requirement, as would lawyers administering mortgages on behalf of an estate where such services constitute legal services.

The regulations may prescribe other persons who carry on business as mortgage administrators to be exempt from the requirement to be licensed.

No Deemed Licensing of Real Estate Brokers

Unlike the current Mortgage Brokers Act, the consultation draft would not deem real estate brokers registered under the Real Estate and Business Brokers Act to be licensed as mortgage brokers. It is proposed that real estate brokers be required to be licensed under the Mortgage Brokerages, Mortgage Lenders and Mortgage Administrators Act if they deal in mortgages, trade in mortgages, carry on business as mortgage lenders, or carry on business as mortgage administrators.

The proposed act would exempt from licensing anyone who refers a borrower to a lender for a fee, provided that the person does not otherwise deal in mortgages, trade in mortgages, or carry on business as a mortgage lender or administrator.

The transitional licensing requirements for real estate brokers registered under the Real Estate and Business Brokers Act are included in the draft regulations attached. It is proposed that real estate brokers registered under the Real Estate and Business Brokers Act be given a time-limited opportunity of one year after the coming into force of the regulations to apply to be licensed as a mortgage broker under the proposed act without having to meet additional educational and experience requirements.

3. Licences

The consultation draft proposes four main types of licences:

  • brokerage licence

  • mortgage administrator's licence

  • mortgage broker's licence

  • mortgage agent's licence

The Superintendent would be required to maintain a public register identifying all licensed mortgage brokerages, mortgage administrators, mortgage brokers, and mortgage agents.

It is proposed that the regulations establish classes of licences and requirements applicable to each class of licence. Licences would not be transferable.

Brokerages and Mortgage Administrators

A brokerage licence would be required for any entity which carries on the business of dealing in mortgages, trading in mortgages, or acting as a mortgage lender in Ontario. Only a corporation, partnership, or sole proprietor would be able to obtain a brokerage licence. A brokerage would be responsible for ensuring every mortgage broker and mortgage agent who deals or trades in mortgages on its behalf complies with the act.

A mortgage administrator's licence would be required for carrying on the business of administering mortgages in Ontario. Only a corporation, partnership, or sole proprietor would be able to obtain a mortgage administrator's licence.

Licensees would be able to have more than one type of licence. For example, one corporation might only administer mortgages and would therefore only be licensed as a mortgage administrator. Another corporation might both administer mortgages and deal in mortgages, so it would be required to be licensed as a mortgage administrator and a brokerage.

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Mortgage Brokers and Agents

Individuals who deal or trade in mortgages would be required to obtain a mortgage broker's licence or a mortgage agent's licence.

A licensed mortgage broker or mortgage agent would only be authorized to deal or trade in mortgages for one brokerage at any given time.

It is contemplated that the primary difference between an agent and a broker is that an agent would be an entry-level position, whereas a broker would have additional experience and educational courses (to be set out in the regulations) and would be able to supervise agents or be designated as principal broker. Agents would not be permitted to deal or trade in mortgages unless they are supervised by a licensed mortgage broker.

Principal Broker

Every brokerage would be required to designate a principal broker. The regulations would set out criteria that a person would need to meet in order to be designated as principal broker. These may include education and experience requirements in addition to the requirements for licensing as a mortgage broker.

It is intended that the principal broker be a chief compliance officer for the brokerage. The responsibilities of a principal broker would be set out in the regulations.

A mortgage administrator would not be required to designate a principal broker.

4. Licensing Process

Initial Application and Renewals

Anyone who wished to apply for a licence would be required to apply to the Superintendent. A consultation draft of the regulations containing the proposed licensing requirements is attached and discussed later in this document.

Brokerage licences and mortgage administrator licences would not have a fixed duration and would not require periodic renewal.

The duration of a mortgage broker's or mortgage agent's licence would be set out in the regulations. Consideration is being given to setting the licence duration at two years. Brokers and agents would be required to apply to the Superintendent to renew their licences before the expiry date.

Mortgage broker's or agent's licences would specify the name of the brokerage for whom they are authorized to deal or trade in mortgages. If the name of the brokerage changes, or the mortgage broker or agent changes brokerages, then the mortgage broker's or agent's licence would need to be amended by the Superintendent.

Notice of Proposal

A written notice would be required when the Superintendent proposes to refuse to issue or renew a licence, to impose conditions on a licence without the applicant's consent, to amend a licence without the licensee's consent, to refuse to renew a mortgage broker's or agent's licence, to suspend or revoke a licence without the licensee's consent.

Upon receiving a notice of proposal, an applicant or licensee could request a hearing by the Tribunal. The Tribunal would have the power to direct the Superintendent to carry out the proposal, substitute its opinion, or impose conditions. If the Tribunal's decision was appealed, the Tribunal could grant a stay of the order until the outcome of the appeal was determined.

Where any delay in suspending or revoking a licence could harm the public, the Superintendent would be able to make an interim order suspending that licence, pending the outcome of any hearing by the Tribunal.

The Superintendent would be empowered to revoke a licence or refuse to issue or renew a licence without making a proposal in certain circumstances, for example, if the applicant or licensee failed to pay a fee or administrative penalty.

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Automatic Suspension and Surrender

It is proposed that a brokerage licence be automatically suspended if the brokerage ceases to have a minimum of one mortgage broker authorized to deal or trade on its behalf.

As well a mortgage broker's or agent's licence would be automatically suspended if the brokerage no longer authorizes him or her to deal in mortgages on its behalf , or if the brokerage's licence is suspended, surrendered, or revoked.

It is also proposed that the holder of a brokerage licence or a mortgage administrator's licence be required to apply to the Superintendent for permission to surrender its licence. In these cases, the Superintendent could permit the surrender or, in accordance with the notice of proposal process, impose conditions on the surrender or propose to refuse the surrender. This would be an opportunity for the Superintendent to be satisfied that the surrender would not be contrary to the public interest.

5. Administration and Compliance

Licensees would be required to file information and documents with the Superintendent. Details of the filing requirements would be set out in the regulations.

The Superintendent would be able to impose set administrative penalties on licensees for failure to comply with filing requirements. The Superintendent's order for an administrative penalty could be appealed to the Tribunal.

To ensure compliance with the act, the Superintendent would be able to make inquiries and conduct examinations of licensees and persons who are required to be licensed.

For these purposes, the Superintendent or a designate could conduct inspections of the person's business premises and require a person to assist in accessing information, documents, or electronic records including, where necessary, providing documents under summons or giving information under oath. In certain circumstances the Superintendent or designate would be able to obtain a search warrant from a justice of the peace to enter premises to conduct and inquiry or examination.

6. Enforcement

The enforcement powers would be modernized to enable the Superintendent to make compliance ("cease and desist") orders requiring a person who is not complying with the act or regulations to stop their activities and take steps to remedy the situation.

The Superintendent would be required to give written notice of the proposed compliance order, and there would be a right to a hearing before the Tribunal. Interim orders could be made if the interests of the public may be adversely affected by any delay in issuing an order.

The Superintendent, through a freeze order, would be able to take steps to preserve the assets or trust funds held by a licensee or person required to be licensed where a notice of proposal or order has been or is about to be made and the Superintendent believes the order is required in the public interest. The person could request a hearing before the Tribunal. Affected parties would be able to apply to the court for directions on the application of the order or the disposition of the property under it. The Superintendent would also be able to seek the court's direction on the disposition of the property affected by the order.

The draft legislation also would enable the Superintendent to apply to the court to appoint a receiver, receiver-manager, liquidator, or substitute trustee. An order could be made without notice to affected parties, but it would expire after 15 days unless extended by the court.

The consultation draft proposes that the Superintendent have the power to impose administrative penalties in accordance with regulations for contraventions of the legislative requirements. This would provide an alternative administrative remedy to prosecution or other sanctions. A person who paid an administrative penalty as required would not be charged with an offence for the same contravention.

Under the draft legislation, administrative penalties could be imposed on licensees and on persons who are not licensed but should be. If the Superintendent proposes to impose an administrative penalty, other than the late filing penalty referred to previously, the person would have the right to a hearing before the Tribunal prior to the penalty being orderd.

The consultation draft proposes a maximum administrative penalty of $10,000 for a contravention in the case of an individual and $25,000 in the case of a corporation, partnership, or sole proprietor required to be licensed as a brokerage.

The draft act provides that regulations may prescribe unfair or deceptive practices in relation to dealing in mortgages, trading in mortgages, acting as a mortgage lender, or administering mortgages. These regulations could include such matters as non-compliance with disclosure requirements related to conflict of interest. These regulations will be released for public comment at a later date.

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7. Offences

Not all infractions are treated as offences under the consultation draft. For example, a breach of a specific licence condition or of an undertaking given to the Superintendent could give rise to an administrative penalty or other sanction related to the licence, but would not necessarily constitute an offence.

It would be an offence under the proposed legislation for anyone to

  • not be licensed as required

  • contravene the regulations

  • fail to comply with an order of the Superintendent or Tribunal

  • not assist an inquiry or examination

  • obstruct enforcement of the act

  • provide false or misleading information to the Superintendent or a designate

  • engage in reprisals against employees for providing information in connection with the act

  • engage in unfair or deceptive acts or practices

The consultation draft also proposes penalties for offences. It is proposed that individuals be subject to a fine of not more than $100,000 or one year imprisonment or both. It is proposed that corporations convicted of an offence be liable for a fine of not more than $200,000. A partner or person carrying on business as a sole proprietor could be liable to the higher fine applicable to corporations if the offence related to the powers and duties of the brokerage or mortgage administrator.

Directors and officers of corporations would be liable separately for an offence if they participated in or failed to take reasonable care to prevent the corporation from committing the offence.

The court would also be able to order a person convicted of an offence to pay compensation or make restitution in addition to any other penalty.

8. Disclosure of Cost of Borrowing

The consultation draft contemplates harmonizing rules on cost of credit disclosure to consumers in accordance with the Federal-Provincial-Territorial Agreement on Internal Trade. The objectives of the harmonized requirements are to provide uniform consumer protection across Canada, modernize laws to reflect changes in the credit market, reduce compliance costs, allow businesses to use the same procedures, credit advertisements and disclosure statements in all parts of the country, and result in fairer competition between federally and provincially regulated lenders.

Separate consultation draft regulations are being released for the mortgage broker sector as well as other sectors such as credit unions and insurers. The consultation documents on cost of borrowing will be posted on the Ministry of Finance website.

III. PROPOSED REGULATIONS

The consultation draft of the legislation sets out matters that may be prescribed by regulations. These include:

  • licensing requirements and exemptions from licensing

  • establishing classes of licences

  • licensing process (e.g. issuance, amendment, renewal, suspension etc.)

  • public register

  • information and filing requirements

  • proposals by the Superintendent

  • administrative penalties

  • unfair and deceptive practices

  • transitional matters for issuance of licences

It is anticipated that the regulations will be available for public consultation in draft form at a later date.

Included in this consultation document are a limited number of regulations dealing with the proposed licensing requirements for mortgage brokerages, mortgage administrators, mortgage brokers, and mortgage agents. As well, these regulations contain proposed transitional rules regarding educational requirements. The proposed regulations are described more fully below.

Licensing Requirements for Brokerages

Under the proposed regulations, a corporation would be eligible for a brokerage licence if it is incorporated in Canada, has a suitable mailing address, and has errors and omissions insurance or some other form of financial guarantee in a form approved by the Superintendent. The draft regulations propose that the insurance or guarantee would have to be sufficient to pay a minimum of $500,000 per claim and $1 million for all claims against employees or the brokerage in any one policy year. The Superintendent would be able to refuse to issue a licence where he or she believed, on reasonable grounds, that the applicant was not suitable to be licensed. It is proposed that, in assessing an applicant's suitability to be licensed, the Superintendent would consider the corporation's financial position, the past conduct of any director or officer, any activities of the corporation that may contravene the act, or whether false information has been submitted for the application. It is proposed that no foreign ownership restrictions be imposed on corporations.

Partnerships and sole proprietors would be eligible for a brokerage licence based on requirements similar to those applied to corporations. The key difference is that all partners of a partnership and sole proprietors would be required to be residents of Canada.

It is anticipated that mortgage brokers currently registered under the Mortgage Brokers Act would qualify to be licensed as brokerages under the proposed act provided they meet the prescribed licensing requirements.

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Licensing Requirements for Mortgage Administrators

It is proposed that, for a corporation to obtain a mortgage administrator's licence, it would have to meet the requirements outlined above for a brokerage licence and also have three months' operating expenses readily available. No foreign ownership restrictions would be imposed on corporations.

Partnerships and sole proprietors would be eligible for a mortgage administrator's licence based on criteria similar to those applied to corporations. All partners of a partnership and sole proprietors would be required to be residents of Canada.

It is anticipated that registered mortgage brokers currently authorized to administer mortgages would qualify to be licensed as mortgage administrators under the proposed act if they meet the prescribed licensing requirements for mortgage administrators.

Licensing Requirements for Mortgage Brokers

Under the proposed regulations, an individual would be eligible to be licensed as a mortgage broker if she or he is at least 18 years of age, has a suitable mailing address, is a resident of Canada, and is authorized by a brokerage to deal or trade in mortgages on its behalf. Unless exempted on a transitional basis (see below), the applicant would also be required to successfully complete an approved educational program within the three years prior to first applying for a licence, or have experience and education which the Superintendent considers equivalent to the approved educational program. It is further proposed that an additional requirement, that the applicant must have been licensed as a mortgage agent for at least two years in the three years prior to the application, be effective two years after proclamation of the proposed legislation.

The Superintendent would be empowered to refuse to issue a licence where he or she believed, on reasonable grounds, that an applicant was not suitable to be licensed. It is proposed that, in assessing an applicant's suitability to be licensed, the Superintendent would have regard to the individual's past conduct, whether the applicant's activities contravene the act, or whether the applicant has made a false statement or submitted false information with the application.

As a transitional measure, it is proposed that certain individuals would qualify as mortgage brokers without being required to satisfy additional educational or experience criteria, provided they meet the proposed new licensing requirements (including sponsorship by a brokerage) and apply for a licence within one year. These individuals would include sole proprietors, partners, and active officers or directors associated with a mortgage broker registered under the Mortgage Brokers Act, and listed agents of registered mortgage brokers who have completed certain educational programs. Please note that based on the outcome of the education review, the educational requirements for new mortgage brokers may change (see section below on education review).

Similarly, real estate brokers registered under the Real Estate and Business Brokers Act would be given a time-limited opportunity of one year after the coming into force of the regulations to apply to be licensed as a mortgage broker under the proposed act without having to meet additional educational and experience requirements.

Licensing Requirements for Mortgage Agents

Under the proposed regulations, an individual would be eligible to be licensed as a mortgage agent if she or he is at least 18 years of age, has a suitable mailing address, is a resident of Canada, and is authorized by a brokerage to deal or trade in mortgages on its behalf. Unless exempted on a transitional basis (see below), the applicant would also be required to successfully complete an approved educational program no more than two years before applying for the licence. An individual who is authorized to deal or trade in mortgages for a finance company may be exempt from the educational requirements if the Superintendent is satisfied that the finance company will provide the individual with adequate training.

Individuals who are currently listed with the Superintendent as authorized to deal in mortgages on behalf of a registered mortgage broker may be eligible for one of three transitional measures that are proposed under the agent licensing regulations.

  1. A person who has successfully completed one of several courses specified in the draft regulation would not need to satisfy any further educational requirements, provided the person was listed with the Superintendent immediately before the proclamation of the proposed legislation.

  2. Individuals who have not successfully completed one of the recognized courses, but have at least 24 months of experience in the three years before proclamation of the proposed legislation as authorized to deal in mortgages on behalf of a mortgage broker, would not be required to complete any courses.

  3. Individuals who have not successfully completed one of the recognized courses and who do not have 24 months of experience would be eligible for licensing, but would be required to successfully complete an approved program of education before the expiry date of their licence.
IV. OTHER MATTERS

Syndicated Mortgages

As a general rule, trades in mortgages are not subject to the registration and prospectus requirements of the Securities Act if the mortgages are sold by a person who is registered, or exempt from registration, under the Mortgage Brokers Act. Currently syndicated mortgages, (i.e. those in which there are two or more lenders) are treated in the same manner as other mortgages.

Concerns have arisen that the current syndicated mortgage exemption does not provide adequate protection to investors given the potential complexity of these investments. To respond to these concerns, the Ontario Securities Commission, together with the other members of the Canadian Securities Administrators, recently published for comment a proposal to eliminate the registration and prospectus exemption for syndicated mortgages. The change is contained in proposed National Instrument 45-106 Prospectus and Registration Exemptions and proposed OSC Rule 45-501 Ontario Prospectus and Registration Exemptions.

The Ontario Securities Commission, together with the other members of the Canadian Securities Administrators, published these proposals on December 17, 2004 for a 90-day comment period expiring on March 17, 2005.

If the Canadian Securities Administrators' proposals are implemented, it is proposed that no duplicative regulation of syndicated mortgages be contained in the new Mortgage Brokerages, Mortgage Lenders and Mortgage Administrators Act.

Education Review

A full review of the educational qualifications that will be required of licensed mortgage brokers and agents, and delivery mechanisms for educational courses, is under way. The goal of this review is to ensure that all participants in the mortgage broker industry have education and skills commensurate with their roles and responsibilities.

The Superintendent will develop a skills profile for licensees, measurable learning objectives and a course delivery process. Stakeholders will be consulted throughout the education review. The review will take into account equivalencies that could be given to individuals with education or training from other sectors such as law, accounting, and real estate brokering. The review will also need to take into account the importance of province-wide delivery of programs.

It should not be assumed that, if a course has been determined acceptable for transitional licensing purposes, it will satisfy future educational requirements. The future course requirements will be determined by the education review.

Practice Standards

Consumers also need to be assured that they are treated fairly by mortgage brokers or agents and that they have all necessary information to enable them to make an informed decision. For these reasons, practice standards applicable to brokerages, brokers, agents and mortgage administrators will be more clearly articulated in the draft regulations to follow. Many requirements currently in the regulations under the Mortgage Brokers Act would likely be included and updated under the proposed new regulations. It is anticipated that these and other draft regulations will be available for public comment at a later date.

V. CONSULTATION DRAFT - LEGISLATION
VI. CONSULTATION DRAFT - LICENSING REGULATIONS

 

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