The Real Estate Act and Real Estate Act Rules are very specific about the type of records that must be kept by a mortgage brokerage/broker and the way in which they must be maintained.
It is important for mortgage brokers to understand what is meant by a “record” and their obligations with respect to keeping records. Records can be created and stored in electronic format or they can be converted to electronic format for storage purposes.
For the purposes of the Real Estate Act and Rules, “records” include:
- accounts, books, returns, statements, reports, financial documents or other memoranda of financial or non-financial information, whether in writing or in electronic form or represented or reproduced by other means, and
- the results of the recording of details of electronic data processing systems and programs to illustrate what the systems and programs do and how they operate.
Broadly, records are defined to include all records created and received while dealing in mortgages. Records includes traditional paper documents, and electronic documents such as faxes, emails, website data and other types of electronic contracts arising out of the use of new technologies. The definition of records also includes records in potential deals even if it does not result in a trade.
As indicated, records can be in “electronic format.” In accordance with the Real Estate Act Rules, “electronic” includes “created, recorded, transmitted or stored in digital form or in any other tangible form by electronic, magnetic or optical means or by any other means that have similar capabilities for creation, recording, transmission or storage.”
Brokers should have a record management plan to ensure that all documents and records are maintained. The Real Estate Act and Rules provide brokers with the flexibility to create their own record keeping strategy and record keeping systems based on the brokerage’s size, types of business dealings and dealing area, provided that all documents and records are maintained in accordance the legislative requirements.
Brokers have a duty to communicate the brokerage’s policies and procedures relating to records retention to associates, associate brokers and unlicensed staff and to ensure compliance with the brokerage’s policies and procedures. For example, many associates administer websites on behalf of the brokerage. The broker should be aware of all associate administered websites and to ensure electronic records from these websites are maintained by the brokerage in accordance with the brokerage’s policies.
Records normally expected to be found in mortgage brokerages include:
- general brokerage advertisements (website information, newspaper ads, flyers, bus benches etc.);
- corporate searches;
- power of attorney;
- land title searches;
- presentations made to prospective clients;
- documents related to the underwriting process;
- copies of any faxes received or sent;
- email communications pertinent to the transaction;
- credit bureau reports;
- borrower and lender disclosure documents;
- copies of all service agreements (Lender and Borrower Brokerage contracts) even though they may not have been accepted by the lender or borrower;
- borrower application forms whether they resulted in deals or not;
- letters of employment, notice of assessment and other documents to support the borrower’s application;
- feature sheets, offers to purchase, real estate appraisals and gift letters;
- Fair Trading Act cost of credit disclosure documents;
- environmental, engineering and other professional reports;
- progress, building or stage reports;
- commitment letters and rejection communications;
- mortgage administration agreements;
- adding machine tapes, if used;
- any notes made in day timers (electronic or otherwise);
- photocopies of all mortgage payments received;
- trust account and general account information;
- deposit slips, withdrawal slips and records related to internet banking operations;
- reconciliations, trust ledgers and bank statements and
- any computer data files
This list is not exhaustive and is only a sample of the information that is required to be maintained by the broker.
The Real Estate Act s.25(9) requires brokers to keep their records of brokerage activities and accounting records for a minimum of three years after they came into existence. The three-year period may be extended by the executive director of the Real Estate Council of Alberta in a particular case for the purposes of an investigation or prosecution under the Real Estate Act.
Brokers should also take into consideration other legislative requirements or civil requirements. For example Canada Revenue Agency and FINTRAC have retention requirements in relation to certain records that may exceed the retention requirements under the Real Estate Act.
Brokers may also choose to retain records for longer periods for other reasons, and they have flexibility to convert paper documents in to electronic form and to be maintained electronically to minimize physical space requirements.
Records may be maintained in paper form or electronic form. However if the documents are stored in electronic form the following requirements apply:
- the storage location and medium used for storage is reliable and can reasonably be expected to maintain the integrity of the electronic information;
- if the electronic record was sent, received, converted from paper form, the information that identifies its origin, destination and conversion must be retained;
- the electronic record is maintained in the format that was created, sent, received, or converted or is in a format that does not alter the information in the original record;
- the means to view and reproduce the record are maintained. Often this means that the broker will also need to maintain the applicable computer program and/or equipment to run the program;
- the records are safeguarded by a biometric access (preferred) or by a password or security code controlled by the broker so that the document cannot be deleted or altered other than by the broker or his delegate and only after three years;
- the records are located in a physical premise in Alberta accessible to the broker in Alberta. This includes storing the information in a server located in Alberta (i.e. a Q9 type) of system if the broker has the means to access the information from the server; and,
- the premises where the electronic records are stored are secured and only accessible by the broker and his or her authorized representatives.
Whether in paper or electronic form, the broker has the duty to ensure that all records related to a deal or potential are linked so as to create a complete record of all documents or records relating to the deal or potential deal. For example emails related to a specific mortgage deal should be maintained with the deal file or if maintained in a separate system linked to the deal file. All deals or potential deals must be identified by a sequential code system.
Whether the records are stored in paper or electronic form, the brokerage must maintain all records in Alberta. Records may be stored in a secure location accessible to the broker away from the brokerage’s registered office.
Records may be maintained in multiple offices if required for the purposes of facilitating trade activities from offices in various geographical locations, and the broker must have access to all of these offices or locations. Additionally, the records need to be available at the brokerage’s registered business office if requested by a RECA auditor or investigator in anticipation of an audit or during the course of an investigation.
For more information about mortgage brokerage record-keeping requirements, please see RECA Information Bulletin: Records – Mortgage Brokerage.