Mortgage Broker

12 | winter 2018 cmba-achc.ca CMB MAGAZINE letters to the editor to assess whether you come within the exemption. Keeping Records: Safety in Required Redundancy Question As a MIC mortgage lender, we have mortgage broker/agents send potential clients our way. When we look at a deal, we generally start a file. If the potential mortgage becomes a dead or cancelled deal, are we as the lender required to hold the documentation on the file? Is it the originating mortgage broker's responsibility to hold the details of the file for the required years? In the past we have been holding everything, but it seems redundant to do so. If we must keep the records, is a scanned copy sufficient? Accounts Manager Anonymous MIC Answer e MIC is a registrant under the Mortgage Brokers Act and as such has all the record keeping responsibilities of a registrant (which includes persons who act as mortgage administrators, lenders and brokers). If you rely on mortgage brokers to maintain records which the MIC is responsible to keep, at some point you may find a need for a record which has not been kept by the broker, or which the broker will not provide to you. e need may arise out of litigation, or out of a regulatory demand made by the BC Securities Commission or the Registrar of Mortgage Brokers. e safest course is to keep your records for seven years, even if the deals do not fund. Scanning is the way most brokers these days are storing documents; this is permissible so long as you are able to print them out. A Letter of the Law I very much enjoyed your article "Levelling the Playing Field" in the Summer 2017 issue of Canadian Mortgage Broker; thank you. I am presently studying for the British Columbia sub- mortgage broker licence and enjoyed reading the entire issue of the magazine as an introduction to the industry. I did spend a little time thinking about the questions posed by your article and then found another comment on the same issues by the B.C. Director of Mortgage Professionals Canada, which combined to inspire me to respond in writing. I feel compelled to put forward my understanding on aspects of your article from a perspective founded on education in financial law. e disclosure requirements imposed by substantive law on provincial mortgage broker licensees are directly attributable to the courts having found a fiduciary relationship, or that of utmost loyalty towards the client and of trust towards the broker, primarily through the law of agency at common law and equity. Briefly, the fiduciary is subject to what is sometimes referred to as "no conflict" and "no secret profit" rules, and mortgage brokers further to a duty of confidentiality per the law of agency. Any potential conflict of interest must be disclosed by the broker and approved of by the client. is obligation facilitates the "no conflict" rule, in that disclosure of potential conflicts in good faith and client agreement to those circumstances mitigate potential for an agent's liability arising from the matter. e broker is entitled to a fee for their services and an accounting of fees received, or even managed, is a professional duty which serves to mitigate the ability of an agent to generate a profit secret to the client in activities stemming from the fiduciary relationship. e bank, however, is subject to differing and federal legislation and is also distinguished at common law. With banks, the courts are not likely to find an agent, or employee, of the bank or the bank itself in a fiduciary relationship with the client. E.P. Ellinger in Ellinger's Modern Banking Law (5th edition, 2011, Oxford, pg. 128?129,) cites the famous Foley v Hill (1848) case and decision of the House of Lords, as well as a number of subsequent Canadian cases, to point out that the courts found a bank's usual duties to be that of skill and care in the customer contract and not of a fiduciary nature. e bank is expected to promote their own commercial interests in advance of the client in their "normal" activities of deposit-taking and lending. e bank mortgage specialist is actually acting as an agent for the bank in facilitating mortgage funds for any particular client, and must do so to meet the needs of the bank. e bank mortgage specialist would not be found to have additional fiduciary duties to a duty of skill and care in contract, and therefore common law or substantive law reporting obligations, as does a provincially licensed mortgage broker. Regardless of what may appear to be a disadvantage to the provincial mortgage broker and an advantage to the bank, the CMHC 2017 Mortgage Consumer Survey (cmhc.ca/ surveys) finds that broker share of the market is increasing year over year with all categories of Canadian mortgage consumers. I would imagine that consumers are increasingly finding mortgage brokers to be a value proposition. I will say that although the mortgage broker and the bank mortgage specialist appear to be providing a substitutable service called "the mortgage," the bank and mortgage broker clients are not actually receiving the same service in arranging that mortgage financing. From an academic legal perspective, it does not appear that any lobby effort is likely to induce the courts to reverse the bank's long-established duties and obligations in their lending business to mimic that of a fiduciary or provincially licensed mortgage broker. My sincere regards; the magazine is fantastic and I appreciate it thoroughly. I do look forward to more! Kind regards, Ken Berry, MSc Correction notice: In our Fall 2017 edition, we published a letter to the editor under the heading "Appealing the Criminal Rate of Interest" (page 12). In the second paragraph under the subheading "ird," the reference to "Section 347 of the Interest Act" should read instead "Section 347 of the Criminal Code." Our apologies to the author for the editorial error. Please send letters to the editor to info@cmba-achc.ca

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