FICOM releases disclosure guidelines

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Starting June 30, 2017, brokers in BC will have to disclose what they earn to their clients.

The Financial Institutions Commission (FICOM) released the Mortgage Broker Conflict of Interest Guidelines late Tuesday.

Under the guidelines, every broker who works on a transaction will be required to disclose to borrowers the commissions and bonuses they earn on the file.

“Section 17.3 of the Act requires that mortgage brokers provide disclosure to borrowers in the  prescribed Form 10, which is found in the Act Regulations,” FICOM said in its guidelines.
“Section 17.4 requires the same type of disclosure be provided to lenders.”

The disclosure requirement has been met with widespread industry criticism – many arguing they put the broker industry at a competitive disadvantage against bank mortgage specialists, who are not subject to the disclosure rule.

The Registrar of Mortgage Brokers released a Q&A that addresses many industry questions. That can be read in full here.

Under the new guidelines, brokers will have to go so far as describe what future bonuses they could make on a deal.

“The Registrar accepts that future payments may be difficult to predict with certainty.  While the adequacy of disclosure will depend on the facts of the transaction, as a general practice, a description of each funding tier and what the potential bonus commission will be, in a dollar amount, for each funding tier,  would be considered reasonable disclosure under the Act,” The Registrar of Mortgage Brokers said in its Q&A. “Mortgage brokers are expected to explain how the volume bonus works to consumers, and what is required in order for a mortgage broker to earn the volume bonus in the future.”
 
  • Dave on 2016-11-09 11:04:26 AM

    What a disgrace . BC government is an absolute joke. Meanwhile the banks dont have to say anything about their profits on a mortgage. I'd like to see the clients reaction to the bank showing $20,000 profit over 5 years for the mortgage they just signed up for ...

  • Broker on 2016-11-09 11:11:32 AM

    Actually Dave all clients have to sign a cost of credit disclosure which tells them exactly how much the banks make in interest over the course of the mortgage.

  • Dave on 2016-11-09 11:17:24 AM

    @Broker

    Is it in a dollar amount??

  • nick on 2016-11-09 11:17:26 AM

    there should be a class action suit being brought against the BC government for discimmination against the mortgage brokerage industry. This is the route that should be take by our national organization. Mortgage brokers are being singled out by the government's actions and this is for the benefit of the big banks. Consumers gain nothing from this piece of garbage legislation.

  • Ron Butler on 2016-11-09 11:22:09 AM

    There is an interesting side note to the government's proposal. It would appear that Networks and Super Brokers would also have to disclose any and all compensation that they receive over and above agent's income.

  • Cameron Mackie on 2016-11-09 11:26:39 AM

    If the client is not impacted on our commission structure there should be no requirement to release this information. Our clients won't understand the difference between a large or small commission. If fees are not paid by the client, there should be no requirement to disclose commission amounts.

    Should I get a breakdown of income claims from my doctors? Maybe I can see why they provide us one product/medication over the other.

    What about investment/portfolio managers, insurance agents, car salesmen.... the list goes on. Why pick on mortgage agents/brokers.

  • Dave on 2016-11-09 11:31:04 AM

    This disclosure change plus the governments new mortgage rules are a complete attack by the banks against brokers. And the government is in on it, 100%, backing the banks. Why is there no pushback from the broker association? Lawsuit maybe? Do something before our industry is ruined.

  • Cameron Mackie on 2016-11-09 11:33:45 AM

    REPLY TO:
    -----Broker on 2016-11-09 11:11:32 AM------
    The reason for the cost of borrowing disclosure is because the client is paying that money. It's the cost to have a mortgage with that lender.

    Our finders fees have no impact on our clients therefore should not require a disclosure.

  • Robert Gsscon on 2016-11-09 11:51:49 AM

    Having been in this business 30 years plus. Two things have been constant, competition and change. I am like a little mouse in a room with an elephant, no matter how hard the elephant has tried to step on me it cannot get its big round feet in the corner or I can scurry and stand in the middle of the room and even if the elephant puts its four big round feet together it still can not step on me. My point is : find a way to compete, adjust to change or leave the room.

  • Jerry Braxton on 2016-11-09 12:14:47 PM

    Good point Ron Butler. It hurts the reputation of the industry when a few networks and super brokers take payment from lenders to impose them as "preferred lenders" on front-line brokers. That is the disclosure that needs to occur. Not disclosing it is unfair to consumers because they do not end up with an unbiased recommendation from the broker (even though the broker has done no wrong) they trust. Not disclosing it is unfair to front-line brokers, who are not aware that their trusted advice is in fact tainted. Anything that makes networks and super brokers disclose these payments is good for the industry, front-line brokers, and the public. Don't be surprised if the networks and super brokers fight back. If they want to fight from high ground, they need to be transparent as to these payments. Front-line brokers should be slow to take up the cause of the networks and super brokers without knowing what the they are fighting for.

  • Kevin Cleaver on 2016-11-09 12:49:19 PM

    Transparency is a good thing, at all levels - including brokers and networks. Borrowers should be confident that their broker is recommending the right product, for the right reasons. Brokers should know that their network is requiring them to recommend a certain product for the right reasons. These are proper concerns for a regulator; they protect the public. Anyone who is afraid of transparency might have something to hide?

  • Romeos Delight on 2016-11-09 1:20:57 PM

    Mr. Butler brings up an interesting point. What do you mean all fees over and above the agents income. Don't they already do that? I pay a split of all my fees. Base commissions and bonuses. am I missing something?

  • KJL on 2016-11-09 2:03:24 PM

    There is no doubt is a mixed bag ... As Mr. Butler says, if he making "Y" and his agent "X" what is to be disclosed. Is it the whole 9 yards or just the agents part. I can see many people messing that up.
    The banks disclose a % as they can cross sell so the $ earned can be spread over a mortgage, a line, a card - ie; Step or All in One. Once again the government ( in this case provincial) did not think things thru. Just like they did on the recent changes. What is good for the goose is the same for the gander, so all banks and cu's should be same level as us. Stop dicken us around !

  • Simon on 2016-11-09 2:03:25 PM

    Class action? Lawsuit? On what basis? There may be one - the regulator may not have the power to require the form - but an unemotional, reasoned response is needed. The fact that banks and brokers are not being treated alike does not fit that category. Banks are federally regulated, brokers are provincially regulated. Also, the argument that the change is not good for brokers doesn't help.

  • Jerry Braxton on 2016-11-09 2:10:20 PM

    Romeos: The big networks/super brokers take funds from lenders to have their brokers recommend the product/mortgage. The brokers themselves can be quite innocent in this. The client ends up not getting the best product, the network owner get unearned money, the lender gets an undeserved mortgage, and the broker is left out in the cold. Disclosure of the payments from the lender to the network owner would go a long way to helping the integrity of our industry - to making sure that clients are properly served. Sometimes the regulator is right.

  • Ron Butler on 2016-11-09 2:41:02 PM

    I believe the CEOs of the Big 6 banks think a lot more about what color tie they are going to wear today than they ever think about mortgage brokers. It would be better if we put conspiracy theories aside and understand that a provincial regulator is completely capable of developing policy all by themselves.

    It also would help if we looked at this from a consumer perspective. When you are negotiating to buy a car would you not prefer to know the dealership's profit? Would it be helpful in negotiation to know how the property / casualty insurance broker is paid to keep your Home and Auto Insurance together? I would love to know. So should we really attack a regulator for doing something they believe would be in the public interest?

  • Michele Hall on 2016-11-09 3:23:03 PM

    here is a question to put forward though , does the RBC mortgage specialist (just an example) have to disclose how much they make to their client , their base plus omission, plus bonus, plus any other bank incentive . I dont think so , also what about RBC AMS deals, the mortgage specialist gets their bases plus 50% of the bps paid to AMS ? where is that disclosure ? it needs to be a level playing field. I think it is however nice where a Broker might be gouging a client where they are making 110 bps on easy file and charging a fee . Just my thoughts though.

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