Brokers' call for bank specialist regulation fails

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Vehement calls from mortgage brokers for bank specialists to fall under the same regulatory regime have failed to convince Steven Del Duca, whose recommendations for the MBLAA review to Ontario’s Finance Minister called for the exemption to continue.

“At this point, there is no evidence to suggest there are regulatory gaps that are exposing consumers to harm,” Steven Del Duca wrote in his recommendation letter. “Provincial and federal governments and regulators should nonetheless be encouraged to share best practices with a view to pursuing harmonization where appropriate and continue to monitor this issue.
“As such, I recommend that no change be made at this time to the existing policy that exempts a financial institution and its employees.”

With an ever-increasing competition with bank employees for market share, it’s a decision that may not sit well with brokers.

REMIC -- having polled 1,000 brokers before sending its o Del Duca – indicated there were a large number of industry players who would like to see their banking counterparts subjected to the same regulations.

“Over 72 per cent of respondents indicated a belief that bank employees who act as mobile mortgage representatives also act or behave as mortgage brokers and therefore should be regulated by the MBLAA,” an official letter from REMIC to Steven Del Duca stated. “If a bank employee meets the definition of dealing in mortgages as defined in section 2 (1) of the MBLAA and is dealing in mortgages with lenders other than the bank that employs him or her, the bank employee is acting as a mortgage broker (and) by not being required to meet the same standards of disclosure borrowers are not afforded the same protection as those borrowers dealing with a mortgage agent or broker.”

And it is a sentiment shared by the Independent Mortgage Brokers Association of Ontario (IMBA), which provided its own recommendations to Del Duca.

“At present banks, treasury branches, credit unions, loan corporations, trust corporations or insurance corporations are permitted to act as mortgage brokers and compete with licensed brokers while being exempt from the act,” IMBA’s letter stated. “The present exemption not only places licensed industry members at a competitive disadvantage but also places the public at risk because of the unregulated brokerage activity.”

REMIC makes MBLAA recommendations
IMBA makes MBLAA recommendations
Broker to meet with MPP to discuss MBLAA
  • Gunther K on 2014-01-29 8:30:29 AM

    What makes Finance Minister DeLuca think that a bank mortgage rep with an office within a real estate office is any different than a regulated mortgage broker/agent? It seems our association, CAAMP, is noticeably silent on this issue.

  • Vancouver Broker... on 2014-01-29 8:38:09 AM

    As an AMP Mortgage Broker I know personally of a Bank Mortgage Specialist who has tried to write the Broker exam and failed 3 times. We are dealing with a persons biggest investment of their lives, we should all have to be regulated by the same standards and codes. Banks are the biggest lobbyists to the government, do you really ever think this will change?

  • Northern Broker on 2014-01-29 9:28:12 AM

    this only goes to show the power that the Canadian banks have in the inner circle...

  • Northern Broker on 2014-01-29 9:28:13 AM

    this only goes to show the power that the Canadian banks have in the inner circle...

  • Quan Le on 2014-01-29 9:35:37 AM

    In Québec, to sell mutual funds, bank reps need to get a licence, just like any independent mutual fund sales rep.

    Same thing applies with selling insurance products. I don't know why a mortgage is any different.

  • Steve the broker on 2014-01-29 9:48:37 AM

    Why are RBC mortgage specialists and bank reps allowed to refer mortgages to Home Trust and other secondary lenders, get paid a referral fee and not have to comply with the same disclosure rules as a mortgage broker.

    That's right, in case you didn't know, RBC (maybe other banks) refers mortgages to Home Trust and VWR Capital and other secondary lenders through their alternate lending.

    Home Trust gets well over $1billion in mortgage business from RBC.. is the RBC client made aware that RBC gets a fee?

  • Ron Butler on 2014-01-29 10:45:27 AM

    I respect the sentiments here and agree, these bank reps should be FSCO, FICOM, RECA, you name it, registered; if they deal with any mortgage provider other than their actual banks. The bottom line is the federally regulated banks have made it clear to the provinces they will fight that move and further that because they are the Big 6 Banks, the public is safe and the regulation is unnecessary.

    I know the mortgage broker associations in all the provinces consistently make requests of their regulators to make these changes and it never flies.

    Let's keep asking but I am not holding my breath.

  • kac on 2014-01-29 1:20:26 PM

    this ignorance by the federal govt makes as much sense as does their sentiment of how to balance the budget by 2015,by cutting thousands of govt jobs and eliminating community programs and closing public libraries. I don't hear any talk of any members of the cabinets positions being eliminated or bonus's being cut. By doing this i can only see unemployment rising,more homes in foreclosures and certainly what we see happening now where the middle class being eliminated leaving the rich to thrive and the balance of the country in poverty. Now that's looking out for the nation. CIBC's division of home loans canada has the same privileges as
    rbc i believe.

  • Risk Manager on 2014-01-29 10:38:20 PM

    Like it or not, Banks are regulated at the Federal, not Provincial, level. Brokers like to complain that there is an inequitable playing field...yet many of your lenders are excluded from OSFI oversight. This includes minor inconveniences such as The Bank Act and OSFI Guideline B-20. If you want a level playing field, it has to work both careful what you wish for!

  • John Gimblett on 2014-01-30 4:07:10 AM

    Interesting, the commentators in this piece quote REMIC and IMBA..whose's missing? Where is the pitch from CAAMP, the organization controlled by the banks. Do you think Steven Del Duca received mixed messaging from the "industry"

  • Lior on 2014-01-30 7:30:59 AM

    The alternative divisions of the banks, in my view, are not a threat to the broker channel because alternative lending represents a small percentage of their origination. At the end of the day it is the broker channel that originates the bulk of the alternative volume. Technically, if bank employees are engaged in any kind of brokering activity, such as arranging mortgage loans through lenders other than the institution they work for, they should be licensed just like everyone else.

    Risk Manager:

    What lenders are you referring to specifically? Even non-deposit-taking institutions are affected by the B-20, as do trust companies, and as for the Bank Act, it is a joke when it comes to declaring conflicts of interest and encouraging transparency.

    For instance, bank originators have specific quotas that they must meet cross-selling products such as non-medical mortgage insurance. Fail to sell a certain number of these policies every month to unsuspecting consumers and you get a phone call from your territory manager. After all, what exactly is the profit margin on those? 3,000 or 4,000%? How much does the average premium add to the cost of a 5-year mortgage? An additional $4,000 to $5,000 per term? Is that cost disclosed to the borrower or included in the APR? Brokers sell the same type of insurance, albeit slightly better and more flexible, but at least there is no quota on the institutional level on the individual. How many millions of Canadians are paying those insurance premiums to the banks without even knowing that they will almost never receive a payout if they file a claim? Just curious to know how the Bank Act protects consumers with a product like that.

  • Peter on 2014-01-30 11:16:22 AM

    RBC road reps are sending deals to Street Capital (separate division) directly along with the alternative options HT etc. Our lenders that claim to be "Broker Friendly" are not really supporting us and taking any business they can.
    CAAMP supports bank road reps and allows them to pay the fees for AMP designation.
    We need a Broker Only National Association to stand up for the "licensed" independent brokers and eliminate the various provincial associations that really don't help us.

  • Marie on 2014-01-30 12:50:45 PM

    Do you have any idea how much volume RBC AMS channel puts through? Small percentage? Way off base. In 2007 when the AMS became strong look at the descent of B mortgages in the broker channel. Just two AMS agents alone can put through up to 300 million a year. That channel is very powerful.

  • Blair Anderson on 2014-01-30 5:11:18 PM

    Just for the record, CAAMP also supported the position to have bank road reps licensed under the MBLAA, for the same circumstances noted. You can read all three stakeholder submissions, and Steven Del Duca’s report to the Minister here –

    What I found more disturbing was how only three out of twelve stakeholders even bothered to submit a written commentary. Yet it seems the will of everyone else, with less skin in the game, carries a disproportionate amount of influence.

    Don’t get me wrong, I am not a big fan of CAAMP. In fact, their commentary was the thinnest at 938 words compared to IMBA’s and REMIC’s 2,486 and 1,202 respectively. With a membership far greater than the other two stakeholders combined, I expected a little more from CAAMP. What does that say about their efforts to collect the views and opinions of their broker/agent members, which they claim represent 80% of their membership.

    @ Peter Yes Peter we need a national association for the broker channel. But don’t think for a minute the effort to organize should be done without the provincial associations. There will always be regional differences across the country that can be better supported with provincial chapters. For example, take a look south of the border at the National Association of Mortgage Brokers (NAMB) - This is a good example of the direction we need to be going.

    If anyone is interested in continuing the discussion of starting the Canadian Mortgage Brokers Association (CMBA), please forward me your contact info.

    Blair Anderson,
    Mortgage Broker

  • Versico on 2014-02-02 2:33:42 PM

    Mr. Del Duca may not understand what in fact dealing in mortgages is. Bank Road warriors deal in mortgages for a living and are independent agents in every aspect but name.

  • Maritimer on 2014-02-04 2:28:47 PM

    Fyi when I was at RBC branch in Halifax with my sister recently the docs she was asked to apply forn unsecured line of credit included a clause that acknowledged RBC could refer application to alternative lender at their sole discretion and that she acknowledged RBC could earn a referral fee from the other lender. No mention of amount. I assume this is happening for other types of credit at least at RBC branches

  • Paul Hudson on 2014-02-05 6:18:54 PM

    Considering bank employees are required to be licensed and registered to sell mutual funds, it makes sense they also be licensed to lend.

    I concur with Northern Broker:

    "this only goes to show the power that the Canadian banks have in the inner circle..."

  • Alta Broker on 2014-02-06 12:54:33 PM

    CAAMP isn't representing its membership very well. 85% of the members are brokers but they support the lenders. Its very odd.

  • Paul Therien on 2014-02-07 2:28:15 PM

    I think that some people are missing the point here... Provincial regulators do not have jurisdiction over federally chartered banks - period.

    They are not able to mandate such things as licensing requirements. They have no teeth.

    Lobbying a provincial regulator to govern a federally chartered bank is like pushing a chain up hill.

    This MUST come from OFSI federally.

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