Regulator offers reason for requirement

Regulator offers reason for requirement

Regulator offers reason for requirement An upcoming disclosure change in B.C. is being implemented to ensure brokers put their client’s interests above their own … but is it necessary?

“Disclosure of conflicts of interest in terms that consumers can easily understand,” FICOM said in an email to MortgageBrokerNews.ca, “reduces the risk that brokers provide advice that is not in the consumer’s best interest, but rather, in the broker’s pecuniary interest (for example, where lender A provides higher compensation than lender B).”

Brokers, by and large, pride themselves on the value they offer clients; the various mortgage products offered by many lenders, and the fact that there is no conflict of interest in hocking their own products.

However, the upcoming change that will require brokers to disclose the fees they earn to clients is being put in place to avoid a conflict of interest, according to the regulator. But brokers are arguing it’s unnecessary.

“I can speak for myself, personally, when I look for a mortgage for a client I look for the best deal that offers the least resistance to getting the client funding,” Jason Breau, a mortgage agent with Mortgage Intelligence, told MortgageBrokerNews.ca. “I just finalized a deal that earned me 25 basis points and I didn’t even realize the commission rate until it was done – it didn’t dawn on me to check what I would get paid.

“When the deal was done I thought ‘what was I thinking?’”

A big problem Breau and many other industry players have with the change is that it seems to unfairly target brokers.

“If it only applies to brokers it’s unfair, it’s punitive, it’s prejudiced,” Breau said. “If it’s applied to all professional who offer mortgages, then great.”

One major gripe among professionals is that bank counterparts in the province won’t be required to offer the same disclosure.

As FICOM points out, though, it doesn’t have jurisdiction over that sector.

“The Registrar of Mortgage Brokers does not regulate the activities of bank employees. A mortgage broker’s value proposition is that they work in the best interests of the consumer and are not beholden to any one lender,” Chris Carter, Deputy Registrar of Mortgage Brokers at FICOM, wrote in an email to MortgageBrokerNews.ca. “That is the channel’s competitive advantage. 
“Clearer conflict of interest disclosure strengthens that advantage and provides consumers with even greater confidence in a broker’s services.”
17 Comments
  • Victor Simone 2015-10-26 9:39:34 AM
    I need to wonder how much protection FICOM offers consumers, when FICOM doesn't even make E & O insurance mandatory.

    What type of protection is being offered the borrowing public by disclosing the earnings of the broker handling the transaction ? Especially in cases when the earnings are paid by a lender.

    Just what is prompting this change ? Will borrowers really be protected by telling them what we earn ?
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  • Randy in BC 2015-10-26 9:49:11 AM
    It only works if there is a standard fee that the consumer is aware of. For example, if the standard fee was $1000 and you disclosed you were making $2000 at a particular lender then the consumer deserves to know why. Otherwise we are just confusing the borrower. Frankly it doesn't matter to me if I disclose it or not but it is irritating that FICOM doesn't understand the business or the issues within the business they should and shouldn't waste their time on. For example, can anyone tell me why a CMHC premium does not have to be disclosed as an increase in the interest rate of the mortgage?
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  • Victor Simone 2015-10-26 9:50:41 AM
    On the matter of "looking after the clients' best interests". I hope FICOM understands that earning mortgage business in the independent channel automatically qualifies that business as market tested. Surely, clients are shopping their deals to 2 or 3 banks or brokers.

    A bank ONLY sells their own products, so I just wonder how they are looking after the clients' interests over their own bank interests.

    It seems FICOM's response is only that we can't tell the banks what to do. I hope FICOM really takes more time to discuss this matter with actual stakeholders, because it seems there could be other changes that would address FICOM's concerns.
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