Brokerage transaction

Mortgage brokers must, in their relationship with a client, perform all the acts involved in a mortgage transaction.

Only a representative authorized to act in the sector of mortgage brokerage may:

  • Hold him or herself out as a mortgage broker
  • Act as a mortgage broker
  • Receive remuneration that is contingent on the making of loan secured by immovable hypothec

Brokerage transaction

A mortgage transactionart. 11.1 - LDPSF (en vigueur le 1er mai 2020)
Le courtier hypothécaire est la personne physique qui, pour autrui et contre une rétribution fonction de la conclusion d’un prêt garanti par hypothèque immobilière, se livre à une opération de courtage relative à un tel prêt.  consists of three steps:

  • Mortgage brokers present themselves to their clients. In particular:
    • They explain what they are agreeingArticle 16.7
      Règlement sur l’exercice des activités des représentants : Il lui explique la nature et l’étendue de ses services.       to do for them;
    • They explain the method by which they are remuneratedArticle 9.3 et 16.11
      Règlement sur l’exercice des activités des représentants : Le courtier divulgue par écrit son mode de rétribution.       for their services.
  • Mortgage brokers know their clients. In particular:
    • They ascertain their identity and legal capacityArticle 9.9 et 9.10
      Règlement sur l’exercice des activités des représentants : Il valide que le client est celui qui souhaite contracter le prêt pour lui-même et a l’autorité légale de le faire.      ;
    • they collect information regardingArticle 9.7
      Règlement sur l’exercice des activités des représentants : Il doit être en mesure de connaître son client et la situation de ce dernier.       their situation and needs;
    • They analyze and understand their situation and make a proposal suited to their situation and needsArticle 16.9
      Règlement sur l’exercice des activités des représentants : Il s’agit de l’obligation de « convenance »; le prêt proposé doit convenir aux besoins et à la situation du client.
  • Mortgage brokers advise their clients and give them all the information and explanations they need to make an informed decision. Among other things, the information must allow clients: 
    • Understand the characteristics of the proposed loan
    • Anticipate the costs involved in obtaining the loan
    • Know the penalties applicable in the event of failure to comply with the terms of the loan.
Warning

Mortgage brokers cannot confine their activities to client referrals. To learn more about client referrals and commission sharing

End of the warning
Insight

Mortgage brokers must, at any time, be able to propose the loans of several lenders.

End of the insight

Person employed by a hypothecary creditor or a financial institution

Section 11.2 of the Act respecting the distribution of financial products and services This link will open in a new window (the "Distribution Act")  specifies that certain persons are not mortgage brokers when they engage in a mortgage transaction:

  • Persons employed by or acting for a hypothecary creditor, provided they engage in such a transaction only for that creditor or for a financial institution that belongs to the same financial group as that creditor.

In these situations, such persons are not authorized to hold a mortgage brokerage certificate.

Other exceptions under the Distribution Act

Section 11.2 This link will open in a new window of the Distribution Act also specifies that the following persons are not mortgage brokers when they engage in a mortgage transaction:

  • advocates, notaries, chartered appraisers, liquidators, sequestrators, trustees in bankruptcy and trustees, provided they engage in such a transaction in the exercise of their functions;
  • members in good standing of the Ordre professionnel des comptables professionnels agréés du Québec;
  • a person who is a member in good standing of a professional order or who is governed by an Act administered by the AMF who only gives a client the name and contact information of a person or partnership offering loans secured by immovable hypothec or otherwise merely puts them in contact with each other, provided the member or person does so as an ancillary activity.

The expression “financial group” has the meaning assigned to it by section 147 This link will open in a new window of the Distribution Act. 
 

References

Real estate brokers and mortgage brokerage referrals

Sharing of commissions

Notice relating to the regulatory framework applicable to mortgage brokerage (pdf - 170 KB)This link will open in a new windowUpdated on April 9, 2020"Notice, regulatory framework, mortgage brokerage"