Mortgage Professionals Canada penned a letter to FICOM and in it exposed problems with the regulator’s proposed compensation requirement.
The national association argues there are two issues a FICOM proposal that will require brokers to disclose specific dollar amounts for each deal.
“Firstly, the dollar amount would be a gross income number, which would not show any of the required business deductions for taxes, administrative costs such as licensing, rent, office equipment, connectivity etc., and as such presents an overly inflated impression to the client of the real net revenues generated,” Paul Taylor, president and CEO of Mortgage Professionals Canada wrote in the letter to FICOM. “Additionally, disclosure in this format does nothing to address the problem identified in the Open Letter: since it does not provide a consumer with any information regarding the broker’s compensation potential with other lenders he or she represents, the broker’s motivation for selecting any particular lender cannot be determined.”
In an open letter to the industry, FICOM said industry players “want consumers to understand the disclosure being provided, particularly any dollar amounts.”
MPC says it does want transparency when it comes to compensation, but that it wants that disclosure to be meaningful.
Taylor argues that specific dollar amounts are virtually impossible to provide at the point of application.
“Consumers are often approved to borrow up to a specific dollar amount with the expectation that their closing costs may vary. Actual amounts borrowed therefore are often not known until the transaction is finalized,” Taylor wrote. “ Provision of a percentage or basis points calculation is, therefore, a much more accurate means to convey to a consumer what their compensation will actually be.”
FICOM collected industry feedback on the change up until February 20. It has not yet said when it will officially announce its decision on the Form 10 disclosure rule interpretation.
To read MPC’s letter in its entirety, click here