For some first-time buyers, arranging financing is more daunting than the actual purchase of a home. There’s a glossary of terminology associated with taking out a loan, including variable- and fixed-rate mortgages, debt-service ratio, amortization period, maturity date, and mortgage insurance.
Many first-time buyers look to a mortgage broker to help them stickhandle around these issues. But it’s not that easy because not everyone who calls himself or herself a “mortgage broker” is licensed to provide this service by the Financial Institutions Commission, which is the provincial regulator.
The president of the Mortgage Brokers Association of B.C., Joanne Vickery, told the Georgia Straight in a recent phone interview that members of her association work with many different lenders to negotiate mortgage financing on behalf of their clients. Potential lenders include chartered banks, credit unions, and other organizations that provide money directly to borrowers. “We’re able to source business for a client, and put them into something that’s going to best suit their needs,” Vickery said.
An independent mortgage broker is paid by the lender, so there is no charge to the consumer.
Financial institutions, including banks and credit unions, also employ people who offer advice on mortgages, but Vickery emphasized that these people are not “mortgage brokers” in the true sense of the words. She prefers calling them “road reps”.
“Road reps are technically employees of the bank,” Vickery said. “They are not mortgage brokers.”
She emphasized that road reps who work for national companies, such as the chartered banks, are licensed by the federal Office of the Superintendent of Financial Institutions. She maintained that their first obligation is to sell products offered by their employers, which sets them apart from mortgage brokers.
“Many mortgage brokers have clients who say ‘my broker from the Royal Bank or my broker from the Bank of Montreal’,” Vickery said. “We say they’re not really brokers.”
She said that MBABC is collaborating with the Financial Institutions Commission to educate the public on the difference between licensed mortgage brokers and those who sell products on behalf of financial institutions.
“I’m not saying that the lenders from corporate [institutions] are telling their people to say, ‘You’re a broker,’” Vickery stated. “That’s not really what’s happening, I believe. I believe that these individuals who are employees of the bank are calling themselves that because it’s easier. It’s easier for the consumer to understand.”
The Canadian Bankers Association declined the Straight’s request for an interview on this topic.
The Mortgage Brokers Act does not apply to employees of insurance companies, savings institutions, members of the Law Society of B.C., or any person acting for the government or any of its agencies. Samantha Gale, manager of mortgage broker regulation with the Financial Institutions Commission, told the Straight by phone that her organization has taken action in response to concerns over unlicensed advisors calling themselves mortgage brokers.
For example, Gale said, people who are not employees of a financial institution—such as independent contractors who place mortgages with third-party lenders—are not exempt from penalties under the Mortgage Brokers Act. If they call themselves “mortgage brokers”, they could be penalized if they’re not licensed as mortgage-development brokers. For a first offence under the Mortgage Brokers Act, the maximum fine is $100,000 and individuals are liable to imprisonment of up to two years.
“We only have a handful of people registered as mortgage-development brokers,” Gale said. “So my suspicion is that there is a lot more people out there working in this capacity for savings institutions that aren’t registered as mortgage-development brokers.”
In November 2009, the Financial Institutions Commission issued a bulletin stating that it now has the power to issue a cease-and-desist order. However, Gale said that her office has not received complaints about specific individuals, which is why there haven’t been any enforcement actions. “We have responded to the problem and we have a process,” Gale said. “The problem is not getting the complaint information.”
October is Mortgage Education Month, and to coincide with this, the MBABC is holding a series of seminars across the province. For more information, see www.findabettermortgage.ca.