Ontario’s financial watchdog has issued its final Guidance to enhance the licensing standards for mortgage professionals.
The Financial Services Regulatory Authority of Ontario (FSRA) says the guidelines are meant to help ensure current and aspiring mortgage agents and brokers are suitable to hold a licence, which it adds will “better protect homebuyers and mortgage investors.”
Key changes:
- Assessment of suitability: For the first time, FSRA is providing clear guidance on how it evaluates the suitability of mortgage professionals. This includes assessing educational and technical qualifications, integrity, competence, and past and current conduct.
- Regulatory actions: If FSRA determines that an applicant or a current licensee is not suitable, it may take regulatory actions such as refusing, placing conditions on, revoking, or suspending a licence.
- Ongoing responsibility of brokerages: The guidance emphasizes that brokerages and principal brokers are responsible for screening applicants and continuously monitoring their authorized licensees.
- References to legislation: The updated guidance includes additional references to provisions in the Mortgage Brokerages, Lenders and Administrators Act, 2006, reinforcing the legal framework governing mortgage professionals.
FSRA outlined some examples of conduct that would make a broker or agent unsuitable for licensing, including criminal charges or convictions and breaches of laws or regulations administered by FSRA or other regulatory bodies.
The Guidance, which became effective on July 15, was developed with input from various stakeholders, including mortgage professionals, industry associations, and consumer advocacy groups. The process involved multiple consultations and feedback sessions to ensure that the final rules would effectively address the issues identified in the review.
FSRA noted that stakeholder feedback indicated “strong support for FSRA guidance to protect consumers and maintain integrity in the sector.”
Lauren van den Berg, president and CEO of Mortgage Professionals Canada, was supportive of the final guidelines, adding that they align closely with the association’s own Code of Conduct, which emphasizes responsibility, due diligence, transparency, and honest services.
“By setting clear expectations, FSRA is reinforcing the high standards and ethical practices we uphold at MPC,” she told CMT. “We believe these guidelines will significantly benefit both our members and consumers.”
Building on previous consumer protection frameworks
These latest rules follow on the heels of guidance released by FSRA in June to ensure both mortgage agents and brokers meet high standards of professionalism and ethics. In particular, those focus on ensuring:
- Mortgage professionals know their clients: Brokers must have a thorough understanding of their clients’ financial situations and needs.
- Mortgage professionals know their products: Brokers should be well-versed in the mortgage products they recommend.
- Mortgage options meet client needs: Recommendations should be tailored to suit the specific requirements of each client.
- Clients understand the recommended products: Clients should fully comprehend the mortgage options being proposed.
- Mortgage products are suitable: The products recommended should be appropriate for the client’s circumstances.
- Product recommendations are properly documented: All recommendations and the reasoning behind them must be clearly documented.
The introduction of these guidelines was driven by the rapid rise in interest rates following the pandemic and the impact on variable-rate mortgages, which saw their popularity surge when interest rates were at their lows.
FSRA emphasized that clear guidelines on product suitability are essential to protect consumers in a volatile market, ensuring they receive mortgage products that are appropriate for their financial situations.
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Last modified: July 19, 2024
