Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA) - Licensing Exemption for Mortgage Transactions for Commercial Purposes

Regulation Number(s):
O. Reg. 407/07
O. Reg. 192/08
O. Reg. 188/08
Instrument Type:
Bill or Act:
Mortgage Brokerages, Lenders and Administrators Act, 2006
Summary of Proposal:
In order to implement the recommendation stemming from the 2019 legislative review of the MBLAA to reduce red tape for commercial mortgage transactions, MOF is proposing a licensing exemption that could be made available to sophisticated borrowers and lenders with respect to mortgage transactions for commercial purposes in the following circumstances:

- Carrying on the business of a mortgage lender if lending exclusively to borrowers who are also sophisticated entities;

- Carrying on the business of dealing and/or trading in mortgages on its own behalf or on behalf of a related party who is a sophisticated entity.

MOF proposes that qualifying as a "permitted client" entity, as described in s. 1(1) of O. Reg. 188/08 under the MBLAA would be the threshold used to determine financial sophistication.

The proposed licensing exemption would only be available at the enterprise level and not available to individuals or on a transaction-by-transaction basis.

- To be eligible for the licensing exemption, all clients of the business transacting in mortgages for commercial purposes would need to be sophisticated entities.

- For example, an individual employee of a sophisticated entity who exclusively deal with Permitted Clients would not be eligible for the exemption if other employees of the same entity deal with non-Permitted clients.

- Those wishing to undertake mortgage lending/dealing/trading activities with non-sophisticated entities or non-related parties would not be eligible for the exemption and would still be required to obtain licensing under the MBLAA or work through a licensed brokerage.

This posting also includes draft provisions within O. Reg. 192/08 ("Administrative Penalties") that adds to the criteria that the CEO of the Financial Services Regulatory Authority of Ontario (FSRA) must consider when levying administrative monetary penalties. This additional criterion would require that the CEO must reduce the amount of the AMP levied if, after considering all the circumstances, he/she determines that the AMP amount to be levied could be considered punitive in nature.

Finally, this posting includes a housekeeping amendment to O. Reg. 188/08 ("Mortgage Brokerages: Standards of Practice) which ensures that the definition of "permitted client" will be consistent with that referenced in the draft of O. Reg. 407/07 ("Exemptions from Requirements to be Licensed").
Analysis of Regulatory Impact:
These proposed regulatory changes are expected to reduce administrative costs and red tape for a select number of financially sophisticated entities that would otherwise need to register for a mortgage brokerage licence to deal or trade in mortgage transactions with other sophisticated entities. It is not possible to accurately estimate the costs saved because the number of affected firms is difficult to quantify as some may not be currently licensed under the MBLAA.

Questions for affected entities:
1. If your company currently has a licensed mortgage brokerage, would you forego renewing your licence if this proposal was implemented?

2. Will your business experience cost savings as a result of this proposal if it were implemented. If so, how much do you estimate you would save in the initial year of implementation and for every year following?

3. Will this proposal create any new costs for your business if it were implemented? If so, please estimate those costs for the initial year of implementation, and for the years following that first year.
Further Information:
Proposal Number:
Posting Date:
August 18, 2021
Comments Due Date:
October 4, 2021
Contact Address:
Gina Stephens
Financial Services Policy Division
4th Floor, Frost Building North
95 Grosvenor St.
Toronto, ON
M7A 1Z1