Mortgage Broker

CMB MAGAZINE cmba-achc.ca winter 2016 | 43 licencerevised received recommendations from the public, including the CMBA and MBAAC, which urged the FCSC not to exempt financial institutions from licensing requirements "when the person representing the financial institution arranges a mortgage with a third party lender who is not that financial institution (or its affiliate or subsidiary)." is is because when "the lender is unable to place the borrower with their own mortgage products, then they are conducting mortgage brokering activities and should not benefit from the exemption for financial institutions." Accordingly, the majority of bank reps who place mortgages with their own employer are exempt, while those, fewer in number, who broker or arrange mortgages with other lenders will now need to get licensed as a mortgage broker. e Ontario legislation contains a similar exemption provision. However, despite being in force for the last 10 years, it appears to have had next to no traction, as not a single bank rep doing third party lending has yet obtained mortgage broker licensing in Ontario. is is an interesting juncture – it might be that the exemption provision in New Brunswick will suffer a similar fate as that of its Ontario counterpart. Or alternatively, it could be that New Brunswick, by clearly and emphatically declaring its intention to require bank rep licensing, will spur on the question of where the appropriate lines should be drawn for the bank rep exemption, and move other regulators to enforce its licensing requirements for bank reps doing third party lending via a similar statutory mandate. Time will tell. Mortgage lead generation – Will rate sites be caught in the new legislation? e New Brunswick rules lay out a licensing exemption for persons who make simple referrals to borrowers respecting lenders. e rules allow persons to avoid licensing if they provide borrowers with only contact information for lenders and disclose referral fees received to prospective borrowers. is means that persons who make incidental mortgage referrals – such as a realtor who recommends a mortgage broker to a purchaser – would not be captured by a requirement to obtain mortgage broker licensing, provided that any referral compensation is disclosed to the purchaser. However, entities and individuals who actively solicit mortgage referrals as a business are not exempt from mortgage broker licensing under the New Brunswick rules. is would include mortgage lead generation entities or persons who provide lists of mortgage leads and then sell them to mortgage brokers, who may contact the individual leads for the purpose of attempting to arrange mortgage financing for them. e New Brunswick regulators explain that "lead generation or referrals that go beyond a name and contact information would not fall within this exemption under the Licensing Rule. ose entities taking mortgage applications or pre-screening possible referrals to mortgage brokers would be required to be licensed. is requirement is consistent with the Cost of Credit Disclosure Act, which requires registration as a credit broker when credit applications are taken, and disclosure to the potential borrower." It could be that mortgage rate sites, which have sprung up in recent years to advertise lender-specific rate information to borrowers and then hook them up with lenders, are considered akin to mortgage lead generators and will require licensing. e provision of rate information to the borrower in the course of making the referral does appear to clearly disqualify them from the simple referral exemption. We know that the mortgage business has changed radically over the decades thanks to numerous influences, including the rise of the Internet, which is now a primary modern communication tool, as well as the growth of the mortgage brokering industry and the element of competition amongst lenders, including banks. We see recognition of these industry dynamics in the New Brunswick mortgage broker legislation, and more specifically, in the licensing exemption rules. We await implementation of this new licensing regime come April.

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