Mortgage Broker

registrationrequired 16 | winter 2015 mbabc.ca MortgageBroker BY Samantha Gale MBABC proposes changes to prevent unregistered or unlicensed mortgage broker activity Defining Mortgage Brokering Does a mortgage broker have to be registered under the Mortgage Brokers Act (MBA) to collect a fee? What if the fee is sizable, say over $600,000? Believe it or not, in some circumstances, an unregistered broker can collect a fee, even one that is astonishingly large. MBABC wants to close this legislative gap. MBABC recently wrote to the government regarding a recent BC Supreme Court case that highlights a discrepancy between the definition of mortgage brokering in the Mortgage Brokers Act and the offence provisions in section 21 of the MBA. As many people in the industry already know, section 1 of the MBA defines what activities constitute mortgage brokering for the purposes of determining whether a person requires mortgage broker registration. Specifically, section 1(d) defines mortgage brokering as "receiving an amount of $1,000 or more in fees or other consideration, excluding legal fees for arranging mortgages for other persons." Other definitions of mortgage brokering in section 1 include a "carrying on business" trigger (e.g., mortgage lending and mortgage administration). However, the definition of mortgage arranging contains no such business trigger, but rather the registration requirement is tied to the individual earning $1,000 or more. e BC Supreme Court, in a recent case ( AZTA Management Corporation v. Cro Agencies Ltd. 2014 BCSC 1462), took a closer look at the definition of mortgage arranging by examining the enforcement provisions of the MBA. In this case, the mortgage brokering fee claimed by an unregistered mortgage broker was $630,000, which is obviously well over $1,000. e court found that there was no broker fee agreement in place, but nevertheless, ordered that $95,000 was payable by the borrower on the basis of the market value of the services provided by the plaintiff. In analyzing the question of whether the failure to be registered disqualifies a mortgage broker from collecting a fee, the court decided that a person who arranges a single mortgage (regardless of the size of the fee earned), at the invitation of the borrower, is not a mortgage broker for purposes of the MBA. e court came to this conclusion because section 21 of the MBA only makes it an offence to "carry on business as a mortgage broker or submortgage broker unless the person is registered," and the plaintiff, having only arranged one mortgage, was not considered to be "carrying on business." Clearly this case demonstrates that someone can satisfy the definition of mortgage brokering by earning a sizeable fee for arranging a mortgage, yet escape the consequences of failing to be registered, due to the business trigger requirement in the enforcement sections of the MBA. Can we really say that the public is 16 | winter 2015 mbabc.ca MortgageBroker

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