As of May 1, 2020, mortgage brokers, who are currently subject to the Real Estate Brokerage Act This link will open in a new window and the regulations of the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ) This link will open in a new window, will be representatives within the meaning of the Act respecting the distribution of financial products and services (the “Distribution Act”) and regulated by the Autorité des marchés financiers (the “AMF” or the “Authority”).
Beginning on the transfer date, the practices and rules relating to remuneration, commission sharing and client referrals and the obligations specified by the AMF will apply to mortgage brokerage.
Until May 1, 2020
Real estate brokers are currently permitted to refer clients to mortgage lenders and to be remunerated by such lenders contingent on the making of a loan. In such cases, real estate brokers must disclose to the client the existence of a referral agreement and the fact that they receive remuneration.
Effective May 1, 2020
Referral to a mortgage lender
Beginning on May 1, 2020, real estate brokers will need a mortgage broker certificate issued under the Distribution Act in order to receive remunerationUnder the Distribution Act, the firm, the independent representative or the independent partnership (the “registrant”) receives the remuneration and then redistributes it to the representative concerned. that is contingent on the making of a mortgage loan.
The Distribution Act stipulatesSections 11.1 and 11.2 of the Distribution Act. that only the holder of a mortgage broker licence and persons benefitting from an exception may engage in a brokerage transaction relating to a loan secured by immovable hypothec for others and in return for remuneration that is contingent on the making of such a loan.
Real estate brokers who do not hold a mortgage broker certificate will, however, still be able to refer clients directly to mortgage lenders and be remunerated by them provided the remuneration is not contingent on the making of the loan granted.
They will, for example, be able to be paid by way of an amount for each referral, a lump sum, an annual amount, and so forth.
Referral to a mortgage broker
Real estate brokers will also be able to refer clients to and share in the commissions of mortgage brokersUnder section 100 of the Distribution Act, the registrant shares a commission.. The amount received from the sharing of a commission will be contingent on the making of the loan obtained by the mortgage broker from the mortgage lender. The Distribution Act will allow mortgage brokers to share their commissions with real estate brokers.
Mortgage brokers and their obligations
Regardless of the current situation, as of May 1, 2020, mortgage brokers will not be able to confine their activities to making referrals. When they become involved in a mortgage transaction, they will have to perform all the acts that make up a mortgage brokerage transaction.
Consequently, mortgage brokers will have to comply with all the rules and obligations applicable to them and set out in AMF regulations, including those pertaining to professional development and ethical conduct, and the rules governing the pursuit of activities as a representative.
Real estate agency-mortgage brokerage firms
Theoretically, as the regulations made under the Distribution Act currently stand and barring a change in this regard, there is nothing preventing a real estate agency from registering as a mortgage brokerage firm if it is a legal person.
In such a case, several rules must be followed, including ensuring that the information collected by mortgage brokers remains confidential. Such information must be recorded in the mortgage brokers’ client files and be inaccessible to persons not authorized to access it, including real estate brokers.
However, as part of regulatory development work to be carried out after May 1, 2020 pertaining to all clienteles regulated by the Distribution Act, the AMF will analyze the application of its multidisciplinarity rules and may seek comment on the changes to be made.
Changes to the regulatory framework for mortgage brokerage
The AMF is continuing its work to incorporate the mortgage brokerage sector into its regulations. The details of this regulatory project will be communicated when public consultations are held in the fall of 2019.
For information about licensing, examinations and professional development programs, see the Mortgage brokerage supervision page, which includes an FAQ.
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