RECA begins additional syndicated mortgage consultation

The Real Estate Council of Alberta’s (RECA) Mortgage Brokers’ Advisory Committee (MBAC) continues to explore whether RECA should remain the regulator of mortgage broker industry members dealing in syndicated mortgages. MBAC has prepared a number of recommendations with respect to the regulation of syndicated mortgages, which, along with input from industry members, will be considered by Council.

Currently, the Alberta Securities Commission (ASC) has an exemption from its registration and prospectus requirements for those persons that are licensed with RECA as a mortgage broker and dealing in syndicated mortgages. It is considering a proposal to remove that exemption.

Council has directed the MBAC to further explore all aspects of RECA being the regulator of syndicated mortgages in Alberta for its mortgage brokers. To assist in facilitating the work of the MBAC, the MBAC created the Syndicated Mortgage Subcommittee (Subcommittee) consisting of three MBAC members and five industry members that deal in syndicated mortgages. The objectives of the Subcommittee were to design a regulatory system that would:

1. enable RECA to effectively regulate the conduct of mortgage brokers dealing in syndicated mortgages;
2. provide the appropriate levels of consumer protection and disclosures; and,
3. emulate the best practices currently used by competent and prudent mortgage brokerages dealing in syndicated mortgages.

The Subcommittee reviewed all aspects of dealing in syndicated mortgages that it deemed appropriate and it identified a number of key concepts that would be the basis for an appropriate regulatory program.

1. determining the activities of mortgage brokers that will be captured by the legislation;
2. defining the obligations and duties of mortgage brokers with respect to their dealings with lender clients and borrowers;
3. identifying the appropriate disclosure requirements and prohibitions for any conflicts of interest;
4. identifying mortgage disclosure requirements for lender clients and borrowers;
5. establishing appropriate mortgage administration requirements;
6. determining if errors and omissions liability insurance and fraud insurance is required and at what levels of coverage;
7. establishing appropriate education modules for existing and potential new mortgage brokers; and,
8. determining the resources required by RECA to effectively regulate deals in syndicated mortgages by its mortgage brokers.

As a consequence of its work on syndicated mortgages, the Subcommittee determined that underwriting and lender representation requirements also apply in non-syndicated mortgage deals. A number of the legislative amendments recommended will therefore affect the sections of the current Rules dealing with lender clients.

Following review and acceptance of the subcommittee’s recommendations, MBAC has prepared a report recommending to Council that RECA continue to regulate mortgage broker industry members dealing in syndicated mortgages and enhance that regulation by establishing minimum standards through the Real Estate Act Rules.

Council must now decide how it wishes to proceed with respect to the regulation of mortgage broker industry members dealing in syndicated mortgages.

Syndicated mortgage survey

To assist Council in its deliberations, the Committee believes additional information and data related to the extent of syndicated mortgage activities by mortgage broker industry members is required. Although the Committee has anecdotal evidence as to the extent of syndicated mortgage activity by industry members, it will greatly assist Council to have specific data from mortgage brokerages.

To that end, the Committee has released a survey to all mortgage brokers and brokerages in Alberta asking for input with respect to their syndicated mortgage dealings. The survey was sent via email to all brokerage and is also available on the homepage of the RECA website at www.reca.ca. Responses are due by Thursday, April 23, 2009.

 

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