The head of a large Ontario brokerage – and VP of the province’s mortgage broker association, IMBA – is lobbying for “better-defined” guidelines around “mortgage suitability” in the governing act, arguing it would help fend off competition from the banks.
“It’s something that’s much talked about among brokers, many of who would like to see it removed from the legislation,” Glenn May-Anderson, principal broker for Dominion Lending Centres Alliance, told MortgageBrokerNews.ca. “But I would like to see those requirements kept and better defined as a way to ensure brokers are spending the time to not only fully understand a client’s specific circumstances but also to better draw a distinction between mortgage brokers and agents, on one side, and bank mortgage specialists, on the other. As a marketing tool it has a tremendous amount of potential.”
It may, in fact, be a hard sell, but May-Anderson will attempt to make the case as part of a regulatory review process for the Mortgage Brokerages, Lenders and Administrators Act, 2006, tentatively scheduled for March 2012. The legislation lays out in minute detail most of the licensing requirements for brokers, agents and brokerages – from continuing education requirements to the use of fees. But specific regulations outlining a brokerage’s duty to determine a mortgage’s “suitability for the borrower” have been harder for brokers to nail down.
According to section 24 (1) of Ontario Regulation 188/08, “a brokerage shall take reasonable steps to ensure that any mortgage or investment in a mortgage that it presents for the consideration of a borrower, lender or investor, as the case may be, is suitable for the borrower, lender or investor having regard to the needs and circumstances of the borrower, lender or investor.”
May-Anderson will lobby for the addition of an explicit definition of the terms “reasonable,” “suitable,” and “needs and circumstances.” He would, in fact, like to see all mortgage professionals adopt a more extensive interview with new clients – something the more than 80 agents and brokers working under him already undertake.
“We need to be sitting down with a client and asking a lot more questions about their current and future employment situation, their mortgage strategy, etc.,” said the IMBA VP. “Is it suitable to arrange a five-year mortgage for a client on a two-year work assignment? In most cases, the answer is no, and determining suitability to that level will only help to strengthen the competitive stance of brokers.”
Some brokers have argued the opposite, arguing the requirements, no matter how vague, unfairly open mortgage firms to charges of mis- or non-feasance. They would like to see the section removed next year when the Financial Services Commission of Ontario leads a review of the regulations.
May-Anderson is asking mortgage professionals in the province to actively participate by joining IMBA and getting involved in the review process. He’s also prepared to debate his position on mortgage suitability, although maintains that regularizing standards to a higher level would cement brokers in the role of consumer watchdog.
“If at the end of the day, the public’s perception of mortgage brokers and agents is that they are the same as bank mortgage specialists, we have a problem,” he told MortgageBrokerNews.ca. “And we can’t win by competing solely on rate. What we should truly be competing on are customer service, consumer protection, and professional advice. That’s what will differentiate us.”