Information to be disclosed

A mortgage broker must provide the client with the information needed to make an informed decision.

It is not enough to simply give a client a document or information. A mortgage broker must explain the information they disclose so it is understood by the client and they must answer the client’s questions.

A mortgage broker must explain the services offered by them and the context in which the services are offered: the broker must disclose information about their remuneration and about the lenders they can propose loans from.

What services are offered to the client

A mortgage broker must explain the nature and scope of their services to the client and, if applicable, the services provided by the firm or independent partnership on behalf of which they act, so the services can be understood and evaluated This link will open in a new window.

In order to do business with a mortgage broker, a client needs to know who the broker is and what services they offer. A mortgage broker must take time to explain their role.

For example, a client of a mortgage broker attached to ABC, a mortgage brokerage firm operating under the PrêtPrêtPrêt banner, needs to understand that the broker offers services on behalf of ABC, which means that ABC is the firm involved in the transaction.

Brokers must be transparent with their clients at all times, particularly about the scope of their services.

The names of mortgage lenders

A mortgage broker must inform clients of the types of lenders (e.g., traditional lenders such as banks, private lenders, etc.) they propose loans from.

The Distribution Act specifies that the names of lenders must be disclosed. It is not necessary to disclose the names of all the lenders the broker proposes loans from, just a few to give the client an idea of the kind(s) of loan(s) and type(s) of lender(s) the client will have access to by doing business with the broker.

For now, there is no specific, prescribed way of meeting this obligation. The mortgage broker may therefore disclose this information orally or in writing but must document the disclosure in the client record.

Mortgage brokers must, before proposing a loan to their client, disclose to them, in the manner determined by regulation, the names of lenders with whom their clients have entered into a loan agreement, together with the other information prescribed by regulation (ref.: s. 58.3 This link will open in a new window Distribution Act).

Warning

A mortgage broker must forthwith make a written disclosure to the client of the name of the lender that, if applicable, made more than 50% of the total number of loans secured by immovable hypothec or loan renewals for which the mortgage broker or their firm engaged in a brokerage transaction in the previous 12 months.

If the loans proposed by a broker are concentrated with one lender, clients must be made aware of this fact.

For find out more, refer to section 9.6 of the Regulation respecting the pursuit of activities as a representative This link will open in a new window.

End of the warning

These disclosures enable the client to understand the types of loans proposed by a broker. A broker should not delay in making them. A good practice would be for the broker to make the required disclosures before services are rendered. If a broker waits until they propose a loan and the type of lender is not appropriate for the client, the client may decide to discontinue the relationship on the basis that they did not have the information needed to make an informed decision. In such an event, not providing that information would result in the broker not being able to claim compensation.

 

Business relationships

If a mortgage broker proposes a loan from a lender with which the broker or the firm on behalf of which the broker acts has a business relationship, the mortgage broker must disclose the business relationship to the client This link will open in a new window.

What is a business relationship?
Any direct or indirect interest held by a lender in the ownership of a firm on whose behalf the mortgage lender acts or, conversely, held by the firm in the ownership of a lender.

Number of lenders

A mortgage broker must forthwith make a written disclosure to their client of the number of mortgage lenders that made loans secured by immovable hypothec This link will open in a new window for which the broker has engaged in a brokerage transaction in the past year. The broker must also disclose the same information, separately, about the firm on behalf of which they act.

For example: “I have proposed loans from 10 lenders in the last 12 months and my firm has proposed loans from a total of 25 lenders.”

This information, together with the information about the type of lender, can give a client a good idea of the types and variety of loans the broker is able to propose. It will help the client make an informed decision when they retain the services of a mortgage broker.

Remuneration

A mortgage broker must make sure clients understand what they are agreeing to when they decide to do business with the broker, including who remunerates the broker and the way and conditions under which the broker is remunerated.

Brokers must be transparent with their clients This link will open in a new window at all times. They must maintain a relationship based on trust and disclose all useful or necessary information.

The information a broker must disclose regarding their remuneration or any other benefit and the timing and manner of such disclosure are specified in sections 9.3 to 9.6 of the Regulation respecting the pursuit of activities as a sales representative This link will open in a new window.

The remuneration claimed or received by a mortgage broker can take various forms.

A broker must explain things so clients understand who remunerates the broker and the way and conditions under which the broker is remunerated This link will open in a new window.

For more information on remuneration, refer to the page Payment of remuneration to representatives and registrants.

Insight

A broker must explain the things they do for the client. They must explain the services offered by them and those offered by the firm This link will open in a new window on behalf of which they act so the client understands the services offered by both and is able to make an informed decision.

End of the insight

All disclosures pertaining to remuneration must be in writing

What to disclose at the outset of the relationship: the method of remuneration

An explanation of how the mortgage broker is paid for their services This link will open in a new window must be provided to the client at the outset of the relationship, even before services are rendered. Mortgage brokers must disclose, depending on their situation:

  • The remuneration or fees they claim for the services they undertake to render (compensation) and the conditions under which the compensation will be claimed from the client.

Example:

“I claim an amount of $X from you to open and administer your record (my compensation).”

“If you retain my services, the lender will pay me a commission (x% of the loan amount) if the loan I propose is finalized, or you will pay me $X for my services (compensation) after they have been rendered.”

  • The compensation amount cannot be random; the client needs to know the exact amount or a simple method for determining it before they can agree to pay it.
  • The client needs to know when the compensation will be claimed.
  • The broker must also inform the client of other circumstances in which the broker’s compensation must be paid (for example, if a loan is proposed that is suited to the client’s situation, but the client refuses it).
  • The fact that the broker receives remuneration from a lender or any other person for the services rendered.

Example:

“My firm pays me a salary for the services I perform for you.”

“The lender will pay me a commission (a % of the loan amount) if the loan I propose to you is finalized.”

  • The fact that the broker receives any other benefit from a lender or any other person for the services rendered.

Example:

“The lender will give me a gift if the loan I propose to you is finalized.”

“The lender will enter me in a contest for a chance to win $X if the loan I recommend to you is finalized.”

What to disclose at any time: changes in remuneration

As soon as there is a change in the broker’s method of remuneration This link will open in a new window, the broker must forthwith make a written disclosure of it to the client.

What to disclose no later than at the time a loan is proposed

Example:

A broker must disclose the nature of the remuneration they will receive from the lender when the loan is finalized (e.g., if they will receive a commission: “I will receive a percentage of the loan amount”).

Example:

“The lender for the loan I am proposing pays bonuses to a mortgage firm/broker when an amount of $X is loaned during the year on recommendations by the mortgage firm/broker. If you finalize the loan I am proposing, I will probably receive such a bonus.”

  • The fact that the broker intends to share their commission, if applicable, and the name of the person sharing the commission.

Example:

“The commission I will receive for recommending this loan to you will be paid by ABC Inc., the mortgage brokerage firm on behalf of which I acted for you, to CH Inc., the mortgage brokerage firm I own. This is my preferred way of being remunerated.”

“A portion of the commission I will receive for recommending this loan to you will be sent by ABC Inc., the mortgage brokerage firm on behalf of which I  acted for you, to the damage insurance firm DEF Inc., which will pay it to x, the insurance representative who referred you to me.”

“A portion of the commission I will receive for recommending this loan to you will be paid by ABC Inc., the mortgage brokerage firm on behalf of which I acted for you, to Mr. X, the real estate broker who referred you to me. A real estate broker is permitted to receive a share of a commission under section 100 of the Distribution Act.”

If the broker refers a client

Whenever a mortgage broker refers a client This link will open in a new window, the broker must disclose to the client, in writing, that they may receive a share of a commission.

Example:

“I am referring you to the damage insurance firm ABC Inc. for insurance on your new home. If you purchase an insurance policy through ABC Inc., I will receive a portion of the commission received by ABC Inc.”

References

  • Regulation respecting the pursuit of activities as a representative This link will open in a new window, specifically the following sections:
    • 9.3 This link will open in a new window A mortgage broker must, before services are rendered, make a written disclosure of his method of remuneration to the client, indicating:

      (1) the compensation claimed for the services he renders to the client, if applicable, and the conditions on which the compensation may be claimed;

      (2) the fact that he receives remuneration or any other benefit from the mortgage lender or any person for the services he renders to him, if applicable.

      A mortgage broker must forthwith make a written disclosure to the client of any change in his method of remuneration.

    • 9.4 This link will open in a new window When a mortgage broker proposes a loan secured by immovable hypothec to a client, he must make a written disclosure of the following information to the client:

      (1) the nature of the remuneration or any other benefit that he will receive if the loan is made, if applicable;

      (2) the nature of any other remuneration or any other benefit that he may receive with respect to the proposed loan; and

      (3) the fact that he intends to share his commission, if applicable, and the name of the person sharing the commission.

    • 9.5 This link will open in a new window When a mortgage broker refers a client, he must disclose in writing to the client that he may receive a share of a commission, if applicable.
    • 9.6 This link will open in a new window A mortgage broker must forthwith make a written disclosure of the following information to the client:

      (1) separately, the number of lenders that made loans secured by immovable hypothec for which:

      a) he engaged in a brokerage transaction in the previous 12 months; and

      b) the firm or independent partnership on behalf of which he acts, if applicable, engaged in a brokerage transaction in the previous 12 months;

      (2) the name of the lender that, if applicable, made more than 50% of the total number of loans secured by immovable hypothec or loan renewals for which the mortgage broker, or the firm or independent partnership on behalf of which the mortgage broker acts, engaged in a brokerage transaction in the previous 12 months.

    • 16.7 This link will open in a new window Mortgage brokers must be transparent in respect of their clients.
      They must, in particular, explain the nature and scope of their services and, if applicable, the services provided by the firm or independent partnership on behalf of which they act, to enable clients to understand and evaluate their services.
    • 16.11 This link will open in a new window Mortgage brokers must provide their clients with the explanations that they need to understand their remuneration.
  • Regulation respecting information to be provided to consumers This link will open in a new window
  • Act respecting the distribution of financial products and services This link will open in a new window, more specifically the following sections:
    • 17 This link will open in a new window Where representatives require compensation from the persons with whom they transact business, they must, according to the procedure determined by regulation of the Authority, disclose to the client the fact that they also receive remuneration for the products sold and the services rendered and any other benefit determined by regulation.
    • 58.3 This link will open in a new window Mortgage brokers must, before proposing a loan to their client, disclose to him or her, in the manner determined by regulation, the names of lenders with whom their clients have entered into a loan agreement, together with the other information prescribed by regulation.
    • 58.4 This link will open in a new window Mortgage brokers must, when they have, or when the independent partnership or firm for which they act has, a business relationship with the lender who offers a loan to their client, disclose that relationship to their client.
      Any direct or indirect interest held by a lender in the ownership of a firm or held by a firm in the ownership of a lender, and the granting by a lender of any benefit or other interest determined by regulation, constitutes a business relationship.