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