Canada's Condominium Magazine
In an industry that deals in hundreds of billions of dollars each year, there are bound to be a few actors who will try to get a little more than they deserve. They may succumb to the temptation to put their own interests ahead of those of their clients. Mortgage brokers with a certain weakness of character or a predisposition to want more, like some lawyers and others who do the less lucrative work in residential real estate, may very well look at the huge sums of money passing through their hands and decide they want a bigger share of it. Maybe the business isn’t doing so well. Maybe there’s a crisis at home that needs money to fix. Maybe the person is just greedy, or enjoys the thrill of getting away with breaking the law.
Whatever the motive, they can often count on the participation of the customer, whether he or she is fully aware of the seriousness of the lie or not.
This could explain how a person with an actual income of about $30,000, earned through work as a fish filleter, could be approved for a mortgage based on a reported income of more than twice as much, complete with altered Canada Revenue Agency Notices of Assessment. Both broker and client knew this was false, “or ought to have known,” as the allegations put it, and it’s difficult to imagine how anyone could talk his way out of that. Needless to say, submitting this kind of false information is not smiled upon by the mortgage industry. The broker would be de-licensed and liable for costs and penalties if found guilty.
Another common scam is the overvaluing of the property to which the mortgage is to be attached. A Vancouver broker sent a contract of purchase and sale in support of the borrower’s mortgage that stated a purchase price of $2,600,000. The genuine contract was in fact for $900,000 less, $1,700,000. The broker, obviously, “knew or ought to have known” it was not genuine. In this case, the broker was not even registered in the province of BC.
A Toronto broker pleaded guilty to fraud after being charged with being in possession of the proceeds of crime, money laundering, and unauthorized use of credit card data. Brokers do need access to credit card data of course, and consumers need to know they won’t abuse the privilege. But some do. This one was fined $5,000 and ordered to pay $31,366 back to the client in restitution.
Another Toronto man has passed himself off as a mortgage broker despite having been refused a licence by order of the Superintendent of Financial Services due to his “unsuitability” for the work, that arising from his criminal activities. He has been ordered to “immediately cease” all activities relating to borrowing and lending money on property in Ontario.
Mortgages are often the biggest financial commitment Canadians make. Mortgage brokers are regulated professionals who can help you find the right mortgage to finance your home. This new, easy-to-use database gives consumers a way to help check a broker’s background before entrusting them with such an important financial transaction.
These are a few of the shady dealings mortgage brokers get up to when they stray. Now we can see it for ourselves if we wish, in all the (redacted) detail, thanks to the Mortgage Broker Regulators’ Council of Canada (MBRCC). This association of industry regulators wants to promote harmonization of mortgage broker regulatory practices and consumer protection at the national level. To help with this, they have set up a new searchable online database where consumers can find out whether a mortgage broker has been disciplined or had her licence suspended, been penalized, or been issued cease and desist orders.
The chair of MBRCC, Cory Peters, said in a release about the new database that it gives consumers a way to check a broker’s background before entrusting him with such an important financial transaction.
What mortgage brokers need to know about you
According to MBRCC, this is what your mortgage broker will ask you for to help him better understand you, your goals for the mortgage loan, and the type of mortgage you want or need. Your mortgage broker will also ask for documentation to confirm the information you provide.
- Your financial circumstances
- Your assets
- Your sources of income and/or funds
- Your mortgage needs and objectives
- Your knowledge of mortgages
- Your preference in terms and conditions
- Your risk tolerance
- Other parties to the transaction
As mortgage brokers rely on the information you provide, it is critical that you are completely honest when providing them this information. Errors in your application can easily lead to a mortgage that is not right for you and fit your circumstances.
Misstating facts or providing false information in your mortgage application can have serious consequences. Mortgage brokers are expected to ask questions and seek additional information in the event of inconsistencies with the information you provide.
What mortgage brokers must disclose to you
For their part, mortgage brokers must provide you with certain information to help you make an informed decision about your mortgage. Depending on the province, your mortgage broker will be required to provide you with disclosures that include information on the role of the mortgage broker, the material risks of the mortgage, and any potential conflicts of interests.
Cost of Borrowing Disclosure
An estimate of the total cost of borrowing for the term of the mortgage must be provided to you. The total cost of the mortgage depends on the terms and conditions for paying it back, such as the interest rate, fees and the amount of time it takes to pay off the entire mortgage (i.e., the “amortization period”). The total cost can be more than the amount you are borrowing.
In most provinces this information will be provided by the mortgage broker. In provinces where this is not the case, or if you are not using a mortgage broker, this information may be provided by the lender. You can ask your mortgage broker who will provide you with this information.
All disclosure provided to you must be timely. Providing you with the right information at the right time will help you make an informed decision. The timing of specific disclosures may be established by law or regulation in your province.
Accurate, clear, and non-misleading information
The information your mortgage broker provides to help you make a decision must not contain misrepresentations, untrue or misleading statements. The information provided should be accurate and clear. If you do not understand any part of your mortgage transaction, you should ask your mortgage broker for clarification.
Here is a link to the database.