B.C.’s mortgage broker regulator, FICOM, updated the industry Friday on the contentious new compensation disclosure guideline. (More on that contention)
FICOM said it processed 70+ comments about the new policy. Here’s what it concluded:
Simpler Disclosures are Better
The Mortgage Brokers Act regulations prescribe a one-page “Form 10” that brokers should use to identify conflicts of interest that might sway the broker’s advice. This form will replace the multi-page version that’s widely used today.
According to Carolyn Rogers, the Registrar of Mortgage Brokers at FICOM, “Most consumers will find the prescribed one-page Form 10 simpler to absorb than the multiple pages in the [current] enhanced Form 10.”
Probably the best news from FICOM’s announcement was this:
“We are also contemplating the development of information for consumers, to ensure consumers understand why they’re receiving conflict of interest disclosure and how to use the information they receive.”
Misinterpretation of this new disclosure has been one of the industry’s biggest concerns. Research has shown that mortgage shoppers can choose a less optimal mortgage provider if they deem the broker’s compensation somehow abnormal, even when it’s not.
It’s certainly helpful that FICOM will (potentially) issue guidance to homeowners on how to interpret the disclosure. Ideally it will explain the normal range of compensation in our business so consumers can better judge what’s “fair.” Albeit, that context should speak to the complexity of certain applications and the different service levels in our business. Difficult-to-place clients (e.g., those with weak credit, unprovable income, etc.) should sometimes expect their broker to earn more due to the specialized and time-intensive nature of those applications.
“The Registrar will publish guidelines, developed with industry input, that describe how we expect brokerages to review and disclose conflicts to consumers,” said FICOM in its statement.
Of particular interest is how brokers will be expected to estimate the dollar value of lender bonuses or status perks, which often depend on volume or unit sales that cannot always be foreseen.
“We anticipate the release of improvements to conflict of interest disclosure by no later than September 1, 2016,” FICOM says. The actual rule won’t take effect until later, however (no later than January 1, 2017).