Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA) - Proposed New Classes of Licensing
O Reg. 187/08
O. Reg. 409/07
Regulation - LGIC
Bill or Act:
Mortgage Brokerages, Lenders and Administrators Act, 2006
Summary of Proposal:
In the Report issued on the 2019 MBLAA Review, it was highlighted that the current agent and broker licences (and the licensing education required to obtain them) do not accurately reflect the different duties and advice provided by agents and brokers who transact in different types of mortgages.
For example, the risks and features of private mortgages are different from those of traditional mortgages provided by regulated financial institutions, and the knowledge required to properly advise clients is also unique.
The proposed regulatory changes would replace the current MBLAA licensing regime with new licences. Two key features of the proposed framework:
1. Split the existing Agent licence into two licences defined by scope of practice:
• Mortgage Agent Level 1: restricted to dealing in mortgage transactions involving traditional lenders (e.g., banks and finance companies that are approved lenders under the National Housing Act of Canada), and
• Mortgage Agent Level 2: able to transact in mortgages funded by all types of lenders (including private lenders).
2. New pre-requisite experience/education requirements for Agent Level 2 and Broker:
• Mortgage Agent Level 2: at least 1 year experience as an Agent Level 1 and completion of the new licensing education course that focuses on private lending
• Mortgage Broker: at least 2 years experience as an Agent Level 2 and completion of the new licensing education course that focuses on private lending.
Going forward, mortgage agents would need to ensure that the appropriate title for their licence is disclosed and used in any promotional materials, distinguishing whether the licensee is a Mortgage Agent Level 1 or a Mortgage Agent Level 2 (and/or use of the authorized title in French).
This proposed new licensing regime would support:
• Enhanced protection for consumers (borrowers and investors), as consumers would receive appropriate levels of information and advice to make effective decisions about their mortgages/mortgage investments.
• Enhanced reputation and confidence in the industry, as licensees would be better prepared for careers across all licence classes. This approach is responsive to stakeholder input that the existing barriers-to-entry for the profession are too low.
Transition Provisions for Existing Licensees:
MOF proposes that all existing licensees who wish to hold either a Mortgage Agent Level 2 licence or a Broker licence starting April 1, 2023, will be required to either successfully complete the new Mortgage Agent Level 2 licensing education course or pass a challenge exam if they are eligible based on their licensing history to do so. Licensees would need to complete either of these requirements by March 31, 2024.
For more detailed information on the proposed transition provisions that would be in force for the April 1, 2023 - March 31, 2024 licensing year, please see "Transition Requirements for Existing Licensees" attachment.
Analysis of Regulatory Impact:
In order to qualify to obtain a MAL 2 licence, mortgage agents that deal in mortgages funded by private lenders (and all mortgage brokers who wish to retain their broker licence) would be required to successfully complete a private lending course (which is expected to cost approximately $375 [course costs to be set by approved industry course providers]). Alternatively, some agents and brokers may qualify to take a challenge exam.
This proposal would have a one-time cost to the sector of about $5,800,000 in order for all mortgage brokers and currently licensed and eligible mortgage agents to transition to the proposed regime.
This proposal would ensure the licensing classes accurately reflect the different duties and advice provided by mortgage agents and mortgage brokers who transact in different types of mortgages. Specifically, it would ensure that all mortgage agents and mortgage brokers have the appropriate education and expertise in non-traditional mortgage products so that consumers are adequately informed and protected.
February 11, 2022
Comments Due Date:
March 14, 2022
Financial Services Policy Division
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Toronto, ON M7A 1Z1