FSCO Standards of Practice

fscoCanadian Mortgage Professional wrote a good story on Ontario’s new broker legislation.  It touches on how Ontario will soon enact Standards of Practice regulations. Among other things, CMP says the draft regulations are expected to include rules regarding:

  • Verification of the borrower’s identity
    • Lawyers do this currently. It should be interesting to see if FSCO’s requirements of brokers are somehow redundant.
  • Informing the lender of information the brokerage feels may be inaccurate
    • This could make it harder for those edge-seekers who “tweak” the facts to get a deal approved.
  • Informing the borrower if it deals with a lender who funds over 50% of its transactions
    • This is a good one but the number should be lower than 50%.  Even brokers doing 1/3 of their volume with one lender should explain why they rely on one lender so much.  (That said, there are sometimes legitimate reasons for it.)
  • Informing the borrower of the number of lenders it represented during the previous year
    • This should be a fan favourite.  If a broker refers clients to just 3-4 lenders, there may be something wrong (perhaps the broker is thinking “incentives first,” is not up on their product knowledge, etc.)  There are naturally exceptions to this as well.
  • Ensuring that the mortgage is suitable for the client and the risks are explained
    • (No brainer)
  • Providing disclosure in clear language
    • (Ditto)
  1. I`m not a broker, but a realtor in Toronto so I come into contact with many of the broker clients, and you wouldn`t believe how many of them come asking me, what did actually their broker do to/for them. Many come for advice even before borrowing, asking how to find a good broker. These new standards look good. Even the last three ones which seem like they should be the basics of broker standards. The second one might be a problem with some of the less honest “moneymakers” but is there any way that someone or something will make the brokers act like they should? I don`t think so. Perhaps if this info got to the clients in a more public manner, they would check it them selves and learn to trust their gut on picking a broker.
    Julie

  2. Hi John and Julie,
    These are good rules and they will be followed to the same degree most laws are followed. The fact is, the mortgage business is like any other financial industry. 99% of the apples in the barrel are good. (i.e. The vast majority of brokers in this country are honest folks that perform an exemplary service for borrowers). That should not be discounted because of the <1% of bad apples we've heard about from acquaintances or the press.
    Happy Friday!

  3. I think RMA and TMACC agents make up more than 1% of the broker industry (i.e. agents these firms do not give a darn–RMA agents pay a desk fee and do what they want with no recourse, TMACC-well enough said) probably more like 20%, therefore I would say 70-80% of brokers will adhere to, the others they beat to there own drum.

  4. That is a ridiculous and baseless statement John. If your statements were even remotely true FSCO enforcement activities would be quadruple what they are today. You clearly have a bone to pick with these firms and you shouldn’t be casting your stones in this forum.

  5. Michael, I am speaking from personal experience the 2 brokerage companies I am speaking of are notorious for being fraud factories. RMA lets any one become an agent for a $750 per month desk fee–explain to me how you enforce your agents when you have no compliance department and no training programs for agents? As for TMACC–reputation speaks for itself.
    As for FSCO–lol, you really do not know how this game works, it’s lip service, how many broker’s does FSCO cut off per year, in the past 5 years–i can count the amount on one hand.

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