Association provides feedback on bank regulation

Association provides feedback on bank regulation

Association provides feedback on bank regulation The Canadian Mortgage Broker Association is petitioning the government to hold bank mortgage specialists to the same regulatory standards as mortgage brokers.

“The CMBA urges the government to take action to ensure that bank mortgage brokers comply with certain provincial consumer protection statutes that govern areas of exclusive provincial jurisdiction, such as mortgage broker licensing,” Samantha Gale, executive director of CMBA, wrote in a letter to the Standing Committee on Finance. “Mortgage broker licensing statutes provide detailed, well considered and essential consumer protection requirements in the absence of any similar federal requirements.

“It makes sense to put the bank mortgage broker on the same level playing field as other provincially licensed mortgage brokers to ensure that robust consumer protection rules are effective and enforceable against the entire mortgage brokering industry.”

The Standing Committee is currently reviewing consumer protection and oversight at schedule I banks across the country.  

In the letter sent to the Committee – which was shared with – Gale mentions a regulatory gap in federal and provincial regulations that allows bankers to operate as a broker without having to adhere to the regulatory requirements of brokering.

“A ... poignant example of a regulatory gap with banks can be found with the concept of bank mortgage brokers – the ones who negotiate mortgage arrangements for borrowers, not with the bank itself, but with other third-party lenders,” Gale wrote.

She cited a 2011 article by mortgage broker Steven Garganis about one example of a bank operating as a broker.

“Back in the early 2000s, RBC created the Alternative Mortgage Solutions (AMS). This department would take declined mortgage applications and broker them to secondary Lenders like Home Trust, Equitable Trust and other institutional Lenders or Private Lenders,” Garganis wrote. “The intention was to retain as much client business as possible while also generating a new source of revenue.”

Gale argued: “Some of these deals truly befuddle borrowers who walk into a bank expecting to get a conventional bank mortgage, and instead end up with a private mortgage with an unfamiliar lender and sizeable broker fees.

“Bank brokers do not provide borrowers with conflict of interest disclosures which explainswho the bank broker represents or how and how much the bank broker gets paid.

The regulatory double-standard has long frustrated brokers.

New Brunswick recently implemented a regulation that requires brokers to obtain a special license from the Financial and Consumer Services Commission (FCSC) as of April 1.

Bank employees, however, are exempt.
  • Sandra Hill 2017-06-22 11:14:25 AM
    I could not agree more, Samantha you have my voice if needed.
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  • Blair Anderson 2017-06-22 3:18:16 PM
    Who else but an exclusive mortgage broker association could take up this fight. Well done Samantha Gale, and CMBA.
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  • Former Mortgage Banker 2017-06-27 4:38:42 PM
    As a former Mortgage Specialist for a bank and currently a Mortgage Agent I applaud the effort and it's about time that something is done to hold the banks accountable. RBC is not the only bank with that sort of arrangement, TD has one as does CIBC through HLC. Personally speaking I think the banks should not be in the soft credit mortgage market. Mortgage Agents who dabble with these mortgages are much better trained and held to higher regulatory standards than bank employees. As a former bank employee I can tell you with full confidence that the mortgage training you receive is minimal at best. All you are trained to do is sell, sell, sell with little regard to the client's interests. You are expected to not only sell a mortgage but also anchor the client with other products through the branch, mortgage creditor insurance, etc and basically the more crap you sell the customer the higher your future commissions will be. Most bank customers are not aware of this type of compensation and it's poorly disclosed too.
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