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mortgage regulationsThe Ontario Ministry of Finance recently completed a proposal of changes to protect and modernize the Mortgage Brokerages, Lenders, and Administrators Act, 2006 (MBLAA).

The MBLAA requires a review of the Act every five years. The 2018-2019 review was conducted by Doug Downey, the Attorney General of Ontario, and Stan Cho, the Strategic Advisor for the MBLAA Legislative Review.

Seven recommendations came from the review based on research and stakeholder feedback. The recommendations focused on the areas of reducing burden and increasing access for homeowners, lenders, and investors, and strengthening consumer protection and anti-money laundering oversight.

The summarized recommendations are as follows:

  1. Reducing Red Tape for Commercial Mortgage Transactions

More efficiently allocate capital to provide access to credit for Ontario businesses. Generally, the MBLAA does not distinguish regulatory framework between residential and commercial classes, but this recommendation would change that.

Proposals for amendments include reducing regulatory burden on commercial mortgage transactions between “sophisticated entities” such as large companies and financial institutions, that pose an unnecessary burden, like requirements to receive or sign disclosure documents

  1. Reducing Regulatory Burden by Establishing New Classes of Licensing

The report stated that the current mortgage agent and mortgage broker licenses do not accurately reflect the different duties and advice provided in different types of mortgages — for instance private mortgages versus traditional mortgages can be very different.

This recommendation encourages the Ministry of Finance to work with FSRA to propose options for licensing schemes that better reflect the unique practices and activities, and potentially even develop additional licenses.

  1. Reducing Regulatory Burden in Guidance, Bulletins, and Forms

As part of the Province of Ontario’s commitment to reducing 25% of regulatory requirements by 2020, this recommendation centres on reducing red tape in the mortgage broker sector. This “will help boost productivity and competitiveness, and will allow mortgage brokerages to serve their clients more effectively,” the report says.

Included in the recommendation are proposals to ensure documents are written in plain language and simplified as much as possible.

  1. Maintaining Current Licensing Exemptions

Under the current MBLAA, certain licensing exemptions are allowed. This includes a person who provides a simple referral for a borrower to a lender, or vice versa; a licensing exemption for lawyers; and a licensing exemption for employees of financial institutions.

The report recommended keeping the exemptions as is, but to work with stakeholder partners (the Law Society of Ontario and the Financial Consumer Agency of Canada) to ensure proper protocols and consistent standards are being upheld.

  1. Raising and Streamlining Educational and Professional Standards for Agents and Brokers

Mandatory education requirements for mortgage agents and brokers received its own recommendation, with the report suggesting that FSRA work closely with the industry and mortgage licensing education providers to raise education requirements and improve their delivery systems.

This would include expanding the content of the licensing courses and considering creating additional licensing education courses for any new classes (see Recommendation #2).

  1. Incentivising Registration for Private Lenders

In the longest recommendation of the report, the private lender sector came under scrutiny. The report recommended creating a registration regime for private/unregulated lenders that meet certain monetary or activity thresholds.

See our recent blog about this recommendation:

  1. Strengthening the Administrative Monetary Penalty Framework

The final recommendation focused on administrative monetary penalties (AMP) — a civil penalty imposed for contravening the MBLAA. Stakeholder feedback said the current AMP for the MBLAA is not high enough for certain offences to ensure compliance.

In fact, the report stated, in some cases it was suggested that it was less expensive for a company to pay the AMP than to take the necessary steps to achieve compliance.

As such, this recommendation sets out that the Ministry of Finance work with FSRA to review the current AMPs and tailor them for the specific risks and activities in the current marketplace.

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Read the full report to the Ministry of Finance here:

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