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FSRA re-licensing for private mortgages

What you need to know about FSRA’s new licensing requirements for private mortgages

New licensing categories are now in effect for all Ontario brokers and agents who want to arrange private mortgages.

Under the new licensing system introduced by the Financial Services Regulatory Authority of Ontario (FSRA), brokers and agents wanting to arrange both private mortgages and investments for private investors and mortgage lenders will require a “level 2” licence.

Those with a “level 1” licence will be restricted to arranging mortgages with financial institutions or CMHC-approved lenders under the National Housing Act.


What’s behind the changes?

The licensing revamp is a result of a Ministry of Finance directive that came about following a 2019 report that looked at how to improve broker and agent licensing in Ontario to “better respond to the unique practices required by certain segments of the mortgage market.”

It was determined that those working with private mortgage lenders and those raising capital “require a specific set of competencies,” which the new requirements set out to address.  

“The new requirements will help ensure consumers and investors receive appropriate mortgage advice and product recommendations when dealing with private mortgages,” FSRA said in its material for mortgage professionals.

Katie Caravaggio, Mortgage Professionals Canada’s Director of Education, said the new licensing system will ensure mortgage professionals dealing with private mortgages have a solid understanding of the intricacies of these specific products.

“It was found that some licensees who were dealing in private mortgages may not have been sufficiently trained, or at least weren’t familiar with the specific end-to-end process involved with these types of mortgages,” she said.

“The number one result here will be consumer protection, ensuring that agents and brokers have extensive knowledge of the products they are dealing with so that they can provide the proper service to their clients,” she added.

“There are factors that need to be considered when dealing with private mortgages that the broker or agent need to discuss with the client,” she said.

This can include talking about an exit strategy with the borrower, since private mortgages tend to be shorter-term loans, and often for those who can’t qualify at a traditional lender. The mortgage professional would also have to disclose risks to the borrower and make sure they are aware of any type of additional fees.

“These are really important factors, and the mortgage professional needs to be confident in their understanding of them in order to properly advise clients,” she said.

Once fully implemented, any brokers or agents found engaging in private mortgage brokering without the appropriate licence could result in penalties ranging from a warning to licence conditions or ultimately licence suspension, FSRA says.

How to complete your re-licensing

Both the Private Mortgages Course and the challenge exam are available through three FSRA-approved providers, including Mortgage Professionals Canada.

Caravaggio says the association has worked closely with FSRA to create the course content and develop the challenge exam.

“They provided us with the learning objectives and topics that they wanted us to discuss, and then we as an association collaborated with our very experienced, very tenured subject-matter experts,” she said.

The course material covers everything from an introduction to the transaction process when arranging private mortgages, procedures to follow when working with the borrower and the lender/investor, and best practices to detect and prevent mortgage fraud.

“A continued emphasis on ‘know-your-client’ and product suitability will allow for more understanding of what the client needs and less instances of clients being put into mortgages that may not be the right fit for them,” Caravaggio says. “We will continue to focus on consumer protection, which in turn will only strengthen the perception of the industry to consumers. More education = more legitimacy.”

The course also includes material on industry ethics and the Mortgage Broker Regulators’ Council of Canada Code of Conduct.

The 30-hour course is available both virtually as well as in-person. Registration for the course is $299 for MPC members and $349 for non-members.

Who needs to take the course?

Re-licensing under the new program will be mandatory for all mortgage brokers who want to be licensed in Ontario and must be completed by March 31, 2024.

However, brokers with at least five consecutive years of experience can attempt the challenge exam without completing the Private Mortgage Course. They will have one attempt at the exam, otherwise will be required to take the course.

For mortgage agents, the course is only required for those who want to deal in private mortgages. In this case, they would need to complete the Private Mortgage course to achieve the Level 2 designation, as long as they have 12 months of experience over the last 24 months as a Level 1 mortgage agent.

Source: MPC

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Key dates

Here are the key dates to keep in mind when planning your re-licensing:

  • April 1, 2023: New licensing classes came into force

As of April 1, 2023, mortgage agents and brokers will be issued the mortgage agent level 1, level 2, and broker licences, based on specified requirements. Existing licensees will be issued a new licence as part of the 2023 licensing renewal cycle.

  • October 31, 2023: Deadline to complete the Challenge Exam

Eligible individuals who choose to complete the Challenge Exam must pass the exam by October 31, 2023.

  • March 31, 2024: Final date to complete the Private Mortgages Course

Mortgage agent level 2 and mortgage brokers must complete the Private Mortgages Course and apply to renew their licence before March 31, 2024. Licensees who do not meet the education requirements will automatically be transitioned to the mortgage agent level 1 licence upon renewing their licence.

This article was first published in Perspectives magazine.