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FSRA Issues New Guidance to Mortgage Brokerages for Syndicated Mortgage Investments

Due to COVID-19, both public and private organizations are putting measures in place to protect their customers, partners, and other stakeholders.

A few weeks into the pandemic, the Financial Services Regulatory Authority of Ontario (FSRA) also issued guidance for mortgage brokerages and mortgage administrators.

This was done to deal with the uncertainty caused by the pandemic and protect the stakeholders involved in mortgage-based investments during these volatile and unpredictable times.

Guidance for Mortgage Administrators

The FSRA has issued guidelines to ensure that mortgage administrators provide precise and timely updates to consumers with respect to changes to their investment values and mortgage terms.

In essence, mortgage administrators should:

  • Monitor the performance of mortgage investments and keep the investor or lender updated if they observe any impact resulting from COVID-19.
  • Adhere to the terms of mortgage administration agreements, especially when opting to exercise any discretion that has been permitted in the agreements.

Guidance for Mortgage Brokerages

Guidance has also been provided to mortgage brokerages when it comes to syndicated mortgage investments.

As COVID-19 has resulted in confusion for many customers, mortgage brokers can use these guidelines to appropriately communicate with the customers.

Mortgage brokerages should keep the following guidelines into perspective:

  • Ensure that the appraisal of the property accurately reflects its current value. This can be achieved by running an AVM.
  • If the appraisal was conducted before the pandemic started, the mortgage broker needs to update the investor or lender about the risk associated with a dated property valuation.
  • If the appraisal contains limitation statements, these should be highlighted to the investor or lender.

Further Guidance for High-Risk Syndicated Mortgages

In addition to the guidelines released during the pandemic, the FSRA also proposed a supervision approach for high-risk syndicated mortgage investments last year.

This requires mortgage brokerages to submit an additional summary disclosure for syndicated mortgage transactions.

FSRA’s rationale for implementing this supplemental disclosure requirement is to evaluate risk levels of the mortgage transaction in real-time, prevent fraudulent activities, and make it absolutely clear to investors that they are opting for high-risk investments.

How Do You Ensure That You’re Complying?

All you really have to do is ensure that all your information is up to date, effectively documented, and shared with the customers, investors, and/or lenders.

It is also useful to evaluate the value of properties today, to be able to identify and mitigate risk for your investors.

At Teranet, we are committed to get you access to the information that helps you do just that. With the automated property valuation tools available in our Purview solution, you can obtain the latest information and comply with the new FSRA guidelines. To learn more, call 1-855-787-8439 or visit www.purview.ca.

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