CAPL has quarterly meetings with the Financial Services Regulatory Authority of Ontario (FSRA), in which we are able to discuss issues relating to the mortgage brokering sector. We can report that FSRA is very actively focussing regulatory initiatives on private mortgage lending. Here is an update on some of those initiatives:
Mortgage Suitability Consultation
FSRA is currently conducting a consultation on new product suitability guidance, and has presented their expectations around suitability in a webinar (which contains a detailed Q and A), which can be viewed here https://www.fsrao.ca/industry/mortgage-brokering/webinars/fsras-webinar-mortgage-product-suitability-assessment-january-24-2024
FSRA’s goal is to ensure that licensees support suitability assessments with clear documentation – for those engaged in private lending in Ontario, we recommend that you review this example from FSRA on how to document suitability for a borrower obtaining a private mortgage – https://www.fsrao.ca/media/24161/download
FSRA expects licensees to be able to answer and document for private mortgage transactions the following questions:
- Is it clear that the borrower(s) would not have qualified for a lower cost option (e.g., from a lender with lower rates
and/or fees)? - Is the mortgage affordable and sustainable for the borrower for the term of the mortgage?
- Has the broker/agent discussed a realistic exit strategy with the borrower and the risks involved in not executing
that strategy?
In addition, you may wish to review proposed new Investor Disclosure Forms – see section F which addresses suitability advice to investors https://www.fsrao.ca/engagement-and-consultations/consultation-proposed-mortgage-product-suitability-assessment-guidance
The consultation is open until February 28, 2024 and can be found here https://www.fsrao.ca/engagement-and-consultations/consultation-proposed-mortgage-product-suitability-assessment-guidance
Vulnerable Consumer Proposed Approach
FSRA is conducting a sector wide consultation on protecting vulnerable consumers. The purpose of the consultation is to find ways to promote the inclusive and fair treatment of vulnerable consumers and to prevent their targeted financial mistreatment. In addition, FSRA is seeking feedback on improving consumer education, engagement, and awareness building efforts. The consultation closes on March 8, 2024 and can be found here Consultation on FSRA’s Proposed Approach to Strengthening Protection of Vulnerable Consumers | Financial Services Regulatory Authority of Ontario (fsrao.ca)
Deadline approaching to Complete Level 2 Private Mortgage Course
Brokers, principal brokers and level 2 agents wishing to continue dealing in private mortgages need to complete the Private Mortgages Course by March 31, 2024.
APR Compliance Blitz
Ontario mortgage brokerages should be prepared for FSRA compliance audits in 2024 and 2025 which are focussed on cost of credit disclosure and accurate APR calculations. FSRA’s recent examinations have uncovered cases where the APR has been calculated and disclosed incorrectly. Miscalculations usually arise because of the following:
- Excluding required fees (administrative, lender and/or brokerage fees, legal service and disbursement fees, appraisal fees).
- Excluding required fees from the disclosure document – resulting in both non-disclosure to the borrower and incorrect APR calculations.
- Adding incorrect fee amounts due to contradicting statements and disclosures.
For example, lender fees listed in the commitment letter do not match those shown on the disclosure document (or vice versa), and the incorrect fee was used to calculate the APR.
Please provide us with your questions and comments on these matters by emailing us at s.gale@privatelenderassociation.ca
