February 26, 2024
Foreign investors are potentially subject to two tiers of regulation: (1) federal foreign investment legislation provides an initial hurdle towards foreign in-bound investment and the application of such legislation may vary in an ever-changing geopolitical climate, and (2) foreign investors must navigate provincial and territorial regulations to determine whether an investment in agricultural land is even permissible. Blake, Cassels and Graydon discusses how Canada’s regulatory frameworks may evolve to address food security concerns given the momentum seen in the United States. Read the analyses here https://www.jdsupra.com/legalnews/securing-canada-s-harvest-regulations-1720025/
February 26, 2024
The Government of Canada has announced a two-year extension to an existing ban on foreign ownership of Canadian housing. The Prohibition on the Purchase of Residential Property by Non-Canadians Act (the Act) was set to expire at the end of 2024, it will now be extended to January 1, 2027. For further information read here https://www.jdsupra.com/legalnews/canada-extends-ban-on-foreign-home-7301260/
February 26, 2024
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
January 3, 2024
Proposed Criminal Interest Rate Regulations providing exemptions now published. On December 23, 2023, the federal government published proposed Criminal Interest Regulations which specify certain exemptions to the new criminal interest rate ceiling contained in the Criminal Code. If you recall from previous discussions, the government introduced sweeping changes to the criminal interest provisions, which currently prohibits lenders from charging and/or receiving payments from loans with effective interest rates of 60% (which translates to an approximate annualized percentage rate (APR) of 48%) or more. The new prohibited rate will now be 35% APR once brought into force. Note that there is a current consultation to reduce this rate even further. The rationale for the proposed exemptions to the criminal interest rate are based on the view that the proposed exempted loans will not trap consumers in a debt cycle. They include: 1. Commercial loans Loans which are for commercial or business purposes to borrowers who are not natural persons are exempt from the 35% criminal interest rate prohibition, as follows: a) commercial loans over $10,000 and up to $500,000 are exempt from the criminal rate of interest, so long as the APR does not exceed 48%; and b)commercial loans above $500,000 are not subject to any criminal rate cap. The regulations, therefore: -loosen the criminal interest rate prohibitions for commercial loans by removing previous caps for loans over $500,000; -make no changes to commercial loans over $10,000 up to $500,000; and -create greater restrictions for commercial loans under $10,000 by creating a ceiling of 35% APR. 2. Pawn loans Pawn loans under $1,000 are exempt from the 35% APR ceiling provided that the APR does not exceed 48% and certain other conditions are met. 3. Payday loans There will be new federal limits on the total cost of borrowing under payday loan agreements of 14%. This limit of $14 for every $100 borrowed will apply in all provinces with a payday loan regime and is intended to create uniformity in borrowing costs from province to province. Under the proposed regulations, all other loans, including residential mortgages, installment loans and personal loans will be subject to the new criminal rate ceiling. If you have comments or questions on the proposed exemptions or the possible further lowering of the criminal interest rate ceiling, please let us know by emailing us at s.gale@privatelenderassociation.ca Please consider reaching out to your Member of Parliament to share any concerns regarding the proposed legislation.
October 11, 2023
The Department of Finance is launching a new consultation on further lowering the criminal rate of interest, the payday lending exemption and other questions related to access to small loans. The federal government announced intended amendments to the Criminal Code in its 2023 Budget to lower the criminal rate of interest from the equivalent of 47 per cent annual percentage rate (APR) to 35 per cent APR and adjust the Criminal Code’s payday lending exemption to require payday lenders to charge no more than $14 per $100 borrowed. The new consultation asks the following questions: How much further beyond 35 percent APR should the criminal rate of interest be lowered? How can the government improve enforcement of the criminal rate of interest to protect Canadian consumers? Should further revisions to the Criminal Code’s provincial or territorial-requested payday lending exemption be considered? What are the features of credit products that can help Canadians improve their financial positions? What protections from unreasonable fees for credit products, including payday lenders, could help Canadian consumers? What marketing techniques target vulnerable Canadians into taking on high-cost debt, and what measures would protect Canadians from deceptive advertising? How could all types of credit lenders better provide Canadians with information on the costs of credit products, including associated fees and interest? What barriers do Canadian consumers face in accessing low-cost, small-value credit? What barriers do financial institutions, banks, and credit unions in particular, face in increasing their offerings for low-cost, small-value credit to a broader consumer base? What could various levels of government, including provincial governments, do to improve, promote, and support access to low-cost, small-value credit? What could financial institutions, banks, and credit unions in particular, do to improve, promote, and support access to low-cost, small-value credit? Are there practices to improve the availability of low-cost, small-value credit within Canada or abroad that could be learned from? The consultation document can be found here https://www.canada.ca/en/department-finance/programs/consultations/2023/consultation-on-cracking-down-on-predatory-lending-faster-by-further-lowering-the-criminal-rate-of-interest-and-increasing-access-to-low-cost-credit.html In October of 2022, CAPL urged the government to refrain from using the Criminal Code to regulate the lending industries, which are already regulated under various provincial licensing regimes – read CAPL’s letter here – https://www.privatelenderassociation.ca/wp-content/uploads/2023/04/criminal-rate-letter-3.pdf Following the government’s decision to lower the criminal rate of interest, CAPL recommended to the government that it consider adopting various exemptions to the criminal rate of interest prohibition – read the CAPL letter on this subject here https://www.privatelenderassociation.ca/wp-content/uploads/2023/06/Crim-int-exemptions-May-31-2023.pdf Please consider either responding to the consultation or sharing your comments with CAPL at s.gale@privatelenderassociation.ca
July 24, 2023
MBRCC initiatives impacting co-brokering and mortgage product suitability recommendations The Mortgage Brokers’ Regulatory Council of Canada (MBRCC) has published its strategic plan for the next three years (2023-2026). Some of the strategic priorities of the MBRCC focus on licensing issues when operating across multiple provincial jurisdictions. Contrary to some popular views, co-brokering or submission desk arrangements will not resolve the problem of a broker or agent acting in another province where they are not licensed. See the MBRCC strategic plan here https://www.mbrcc.ca/Documents/View/8385 The MBRCC is currently reviewing standards for brokers making product suitability assessments and they have created guidelines for comment by the industry – see here https://www.mbrcc.ca/Documents/View/8366 Mortgage brokers will need to make assessments of their clients needs and document recommendations, the rationale for those recommendations and alternatives. We note that private mortgages (unlike institutional mortgages) are unique transactions, making it impractical for brokers to present alternative mortgage options to lenders and borrowers. CAPL has had discussions directly with FSRA on this subject. If you have questions or comments on any of the MBRCC initiatives or suitability consultation, please contact CAPL at s.gale@privatelenderassociation.ca
July 12, 2023
The Government of Canada has launched a public consultation to examine ways to improve Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime. Comments or feedback in response to the consultation paper are due by August 1, 2023. The consultation paper can be found at this link >> The consultation asks some specific questions impacting the real estate and finance sector. In particular, it asks whether the following additional sectors should be included in the FINTRAC reporting regime: for-sale-by-owner companies real estate auction companies building supply and renovation companies title insurers mortgage insurers white label automated teller machine owners/operators, and factoring companies, which supply short-term loans or upfront payment for the accounts receivable of another business to address their cash-flow needs The consultation also asks whether real estate representatives under the PCMLTFA should be obligated to identify unrepresented parties and conduct third-party determinations in real estate transactions involving unrepresented parties. Of concern to all reporting entities, is a question as to whether administrative penalties should be levied against directors, officers, and agents within an entity in certain cases of violations of the PCMLTFA? Please let us know at CAPL if you have any questions about the consultation or wish to share a perspective or provide comments – email us at s.gale@privatelenderassociation.ca Anti-money laundering requirements for mortgage lenders CAPL has met with consultants working for FINTRAC to assist with the roll out of AML requirements for the mortgage services sector, which includes mortgage lenders. In order to understand private mortgage lenders better, the consultants have asked that this survey be completed Please know that we have explained that private mortgage lenders are not regulated by OSFI and do not underwrite loans as OSFI regulated entities do. In addition, we have also explained that mortgage borrowers are not the clients of mortgage lenders, and that some mortgage lenders/investors are clients who should not be required to comply with AML rules. Here is CAPL’s letter on this subject
June 12, 2023
CAPL has met with consultants working for FINTRAC to assist with the roll out of AML requirements for the mortgage services sector, which includes mortgage lenders. In order to understand private mortgage lenders better, the consultants have asked that this survey be completed. Please know that we have explained that private mortgage lenders are not regulated by OSFI and do not underwrite loans as OSFI regulated entities do. In addition, we have also explained that mortgage borrowers are not the clients of mortgage lenders, and that some mortgage lenders/investors are clients who should not be required to comply with AML rules. Read CAPL’s letter on AML requirements for mortgage lenders here – Final AML letter
June 12, 2023
Recently CAPL proposed four exemptions to the Federal Government which would apply to the new lowered criminal rate of interest. Housing interest prohibitions in the Criminal Code appears to be a result of convenience. On this topic, Senator Pierrette Ringuette has explained that “the Criminal Code is where the law created a limit on interest and is therefore the most productive place to lower interest rates.” Accordingly, we have urged the government to create exemptions which exclude provincially licensed lenders which are already regulated under comprehensive rules and prohibitions, in addition to to other exemptions. Read CAPL’s letter here: Crim int exemptions – May 31 2023
April 21, 2023
The Federal Government is planning to lower the criminal interest rate to 35%. This will impact private and alternative lenders, particularly lenders that provide loans on short terms, for example, bridge loans. CAPL has been advised that the Federal Government has tabled Notice of a Ways and Means Motion for Budget 2023 in the House of Commons. Division 34 of Part 4 introduces changes to the Criminal Code to lower the criminal rate of interest to 35% annual percentage rate, as announced in Budget 2023. As part of the Amendments to the Criminal Code, the government has proposed a regulation-making authority to allow for certain types of loans to be exempt from the criminal rate of interest in future regulations. We are therefore seeking feedback from members concerning what exemptions should be considered for inclusion in the regulation. For instance, should exemptions exist for short term loans, such as bridge financing and real estate deposit loans? Should borrowers which are commercial entities or non-consumer loan transactions be exempted? Please give us your input by contacting us at s.gale@privatelenderassociation.ca
