Mortgage associations present recommendations to regulators

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B.C.’s broker association has now formally presented recommendations to the Regulator's Council of Canada explicitly calling for bank representatives to fall under the same regulations as mortgage brokers.

“Imposing boundaries on the conduct of bank representatives creates a level playing field with mortgage brokers in ensuring adequate and reasonable consumer protection,” the Mortgage Broker Association of B.C. explained. “The position of the Provincial Associations is clear: If a bank representative is in any way dealing with third party transactions they need to operate under the same rules as mortgage brokers with the requisite regulation and training.”

And it isn’t just the MBABC who is leading the cause.

“The MBABC in conjunction with other associations has made a joint submission to the Mortgage broker Regulator's Council of Canada, which includes regulators from BC, Alberta and Ontario, on some key issues relating to mortgage broker regulation,” Samantha Gale of MBABC told “These issues include the regulation of roving bank representatives and suitability standards.  The MBABC met with the MBRCC at their industry meeting on November 23 and addressed some of these issues.”

The recommendations outlined the differences between a mortgage broker and a bank mortgage specialist.

“(A broker’s) role is to shop for mortgages at different financial institutions and find the most suitable deal that fits the borrowers’ needs –this is what makes them an agent or a quasi-agent for the client mortgage brokers also have a clear and unequivocal duty to disclose conflicts of interest to clients,” they said. “This model of brokering contrasts starkly from that adopted by the bank road representative who is fundamentally a salesperson, whose focus is selling mortgages to customers using a model where the bank is the quintessential mortgage shop.”

The three organizations also put forth a compelling argument as to why the same rules should apply to all professionals who have the ability to sell mortgage in Canada.

Of course, this wasn’t the only issue presented. They also made recommendations for suitability, principle based regulation and education. Regarding education, they outlined a proper philosophy called for one association per province to govern the education of brokers.

“Education should be about attracting individuals who want to be well trained professionals not those trying to fast track or find workarounds from doing the necessary work,” they said. “One association per province delivering all professional development or all licensing would allow for shared costs, improved standards and greater professionalism through a shared foundation that can accommodate regional differences.”

  • Welbanks on 2013-11-28 10:01:50 AM

    I'm a huge proponent of brokers, but I don't see this type of action as necessary. There is a difference in what we do versus the bank reps. They work for a bank and they peddle bank products. Period. There is no risk of clients being charged ridiculous fees or conflicts whereby the bank rep is somehow lending their money to the client as a private mortgage. If they are, and it's brought to the surface, the bank will surely punish them for it. I don't see the banks needing the oversight as much as we do. That's not to say there aren't bad apples with the banks, but they aren't selling third party products with the potential for fees.

    The brokers need to be held to a higher standard because we pose more risk to the consumer. I know, we can all bitch and complain that things aren't level, but we're not playing the same game.

    If you want to turn down your licensing requirements, then go work for a bank and sell their product. Otherwise, show the public how much we can shine as brokers, why we are the better option.

    Just because we have to take more courses doesn't change the game. The fact is, bank reps are employed by the bank. We are independent, self-employed sales people and this is the one way to keep us accountable.

    That's not to say some education requirements couldn't be required, but similar licensing may be a bit of a stretch. These products aren't rocket science. It's unfortunate the barrier to entry is so low, but then again it lets poor moops like me make a good dollar for my day. =)

  • Samantha Gale, MBABC on 2013-11-28 10:36:24 AM

    One of the challenges with this subject is that there is an absence of facts from which to base our positions on. However, one thing we do know is that the banks are in fact acting like mortgage brokers. In one jurisdiction, one of the banks has historically been outperforming the mortgage broker houses in deal submissions to a particular B lender. Make no mistake there are employees of federally regulated institutions who are acting just like mortgage brokers, but without the requisite disclosure and fiduciary like obligations being applied to them. At the MBABC, our members have let us know that this is an important issue for them - not an easy one to tackle of course! However, we can start by having a dialogue about the issues and determining some common ground.

  • Gordon McCallum on 2013-11-28 10:45:03 AM

    Another thing MBABC / FICOM should push for is to be more strict about the payment of referral fees to unlicensed individuals, as some of the banks are doing with Realtors in BC. This is illegal in Alberta which dates back to a lawsuit between the province and TD Bank. That would go a long way towards ensuring that people who aren't licensed as a broker stop acting like they are.

  • Welbanks on 2013-11-28 11:04:46 AM

    @Samantha You're correct, there are banks that use the "B" lenders and I don't think they are licensed mortgage brokers so I don't have an answer as to how that is allowed to happen. It would be great if someone from FSCO actually monitored these articles and could comment because in this instance, there is definitely a need for more licensing. On the whole, I don't agree that it's necessary for the bank reps to be licensed to sell only their bank products.

    We should be celebrating that we require more education and training, embrace it and use it to our advantage. Not wallowing in details we may never change, and nor do I agree that they should be changed. Frankly, I am proud that we need some formal training (however minimal it may be) and that separates us from the bank rep.

    The bigger conversation is going back to earlier articles about our trade associations having no teeth and lacking substance. We need them to mandate and require continuing education independent of the empty AMP designation. We don't need the designation, we need the education, and that can further separate us from the bank reps.

    I'm rambling now but I think everyone gets my point.

  • Janet McKeough, MBAAC on 2013-11-28 11:51:44 AM

    The Mortgage Brokers Association of Atlantic Canada (MBAAC) was also a contributor and supporter of the submission to MBRCC. To clarify, we recommended bank representatives who offer only their bank products and services should be treated as 'employees' and exempt from licensing requirements. However, if at any time they offer the products and/or services of a third party they are now acting as a mortgage broker and should be required to have the same licensing and educational requirements.

    With respect to education, a national program was recommended with limited providers to ensure consistency and quality of content. We recognize that, for the most part, mortgage brokers are very well educated and operate with high standards. We feel a strong national program would not only help to elevate the industry but provide added benefits for consumers.

  • Welbanks on 2013-11-28 11:58:57 AM

    @Janet Everything you said sounds great from my perspective. I would support that kind of motion.

    I may have been a bit harsh sounding in my treatment of broker education, but like you said, many are well educated and well-intended with continuing education. A national program with enforceable requirements would be a strong message to send to consumers.

  • Samantha Gale, MBABC on 2013-11-28 12:07:45 PM

    To be clear the submissions to the MBRCC were submitted by the provincial associations from BC, Alberta, Ontario and the 4 Atlantic provinces - so associations representing 7 of the ten provinces. I think the only way to tackle this issue is to have a cross-provincial dialogue.

  • Lior, Mortgage Edge on 2013-11-28 1:10:11 PM

    I cannot believe how some banks, specifically Royal Bank, are allowed to have bank employees, who are not licensed, secure mortgage financing from alternative lenders in exchange for a referral fee paid to the bank. In Ontario, licensed brokers have a fiduciary responsibility to their clients and are bound by legislated disclosure agreements. The banks are not, they are governed by the Bank Act. So how are bank employees, who are not licensed to broker mortgages with third party lenders, are allowed to do that and I can't? FSCO, I want my 800 bucks back!

  • Blair Anderson on 2013-11-28 6:15:07 PM

    On the one hand, our industry offers consumers excellent choice through the benefits of multiple origination channels. Regulating multiple origination channels is where things go south. In my opinion, every bank who offers consumers that kind of choice, should INSIST on equal consumer protection across every channel they use. Is this not a gross abdication of responsibility on the part of banks? Why are mortgage brokers the only ones concerned?

    In the early 90’s, banks, who bought in to the broker channel, played a big part in the educational reform and qualification of mortgage brokers. Where is that same high level of interest for consumer protection? It can’t all be about lower costs and profitability.

    Yes, there are inherent difficulties with multiple jurisdictions and their respective legislation. But if everyone is involved, with the same end game, it can work!

  • Amber on 2013-12-04 4:06:02 PM

    If you require all bank employees to be licenses just like the rest of us you automatically make then adhere to the same standards and laws of toy land that we have to practice and follow. Right now it is like we are in a two tier lending system and the banks can break the rules when they want. Some of the choices getting made could create crisis under the right circumstances. If you want to be conservative, which many Canadians are more comfortable with, it is time to get the banks who are offering mortgages and clearly at points more then just theirs to walk the same line we are required to. Does it really hurt to require a bank employee to have the same education and ethical requirements we have?

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