Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.
Issue link: http://digital.canadawide.com/i/407986
MortgageBroker mbabc.ca fall 2014 | 9 report from the CEO Recently, the Mortgage Broker Regulators' Council of Canada published a report on its assessment of mortgage broker practices around ensuring mortgage product suitability for clients. One broker, who discussed this report with me, favoured the creation of mortgage broker product suitability standards, but only if the banks had to comply with the same standards. Both mortgage brokers and provincially regulated private lenders have continuously questioned why banks don't have to comply with the various consumer protection rules and standards in this province. For example, one question I think I have been asked more than any other, is why some banks charge more for executing a mortgage discharge than the $75 limit imposed by the Business Practises and Consumer Protection Act. ese are actually very good questions, which deserve more than an ambiguous answer. I know that the answer lies with the tension between provincial and federal laws, and banks clearly seeing themselves on the other side of our provincial fence – in federal territory. e Canadian Bankers Association ( CBA), in its recent submissions on Canada's Financial Consumer Protection Mandate asserted, "Despite the fact that the Constitution gives the federal government exclusive jurisdiction over "banks" and "banking," some proponents continue to believe that provinces have a complementary role to play in this area. at would not be good for consumers. It would be confusing to have overlapping and conflicting federal and provincial disclosure requirements, and consumers would not know whether to complain to the federal regulator or their provincial regulator if they had a concern about their bank." I think most people would agree with the CBA that overlapping or duplicate regulation does not benefit consumers. Advocating for banks to deliver both federal and provincial forms of cost of credit disclosure does not make sense. However, we need to look more carefully at the question of whether federally regulated financial institutions should comply with provincial requirements where there are clearly regulatory gaps in federal legislation, such as with the lack of limits on discharge fees. An even more poignant example can be found with the concept of bank mortgage brokers – the ones who negotiate mortgage arrangements for borrowers, not with the bank itself, but with other third party lenders. A recent article in the Globe and Mail (Rob McLister, February 11, 2013) examined this practice at the Royal Bank of Canada: " RBC . . . mortgage reps route applicants that don't meet normal guidelines to their Alternate Mortgage Solutions (AMS) team. RBC's AMS employees then farm those customers out to other lenders and the bank's mortgage rep gets paid when the mortgages close." According to Steven Gargani from CanadaMortgageNews.ca (April 25, 2011), "Back in the early 2000s, RBC created the Alternative Mortgage Solutions ( AMS). is department would take declined mortgage applications and broker them to secondary Lenders like Home Trust, Equitable Trust and other institutional Lenders or Private Lenders. e intention was to retain as much client business as possible while also generating a new source of revenue." Some of these deals truly befuddle borrowers who walk into a bank expecting to get a conventional bank mortgage, and instead end up with a private mortgage with an unfamiliar lender and sizeable broker fees. Bank brokers do not provide borrowers with conflict of interest disclosures which explains who the bank broker represents or how and how much the bank broker gets paid. In fact I would argue that banks operate like a mortgage shop, where qualified mortgage borrowers are offered a bank mortgage to which they can say "yes, please" or "no, thank you." is service model is fundamentally different from how most mortgage brokers operate. ey work on behalf of clients as agents or quasi- fiduciaries to get them the best mortgage deal possible. So exactly how do bank brokers work, and is there adequate federal legislation in place Supreme Court Decision: Mortgage Brokers vs. Bank Brokers – Time to Even the Playing Field Samantha Gale CEO MBABC & MBIBC samanthagale @ mbabc.ca Some of these deals truly befuddle borrowers who walk into a bank expecting to get a conventional bank mortgage, and instead end up with a private mortgage with an unfamiliar lender and sizeable broker fees.