Chapter 18: Borrower Disclosure

Question 1

One of the things that must be disclosed to the borrower is the role of the brokerage

Answer 1

True – the Borrower must be informed who the brokerage is working for, the Borrower or the Lender or both

Question 2

The nature of the relationship between the brokerage and the borrower must be included in the disclosure document to the borrower.

Answer 2

False - The nature of the relationship between the brokerage and the lender must be disclosed in the Borrowers document.

Question 3

A brokerage fee must be disclosed to the borrower and included in the cost of borrowing.

Answer 3

True

Question 4

To comply with the MBLAA and its Regulations a borrower disclosure document should state “refer to the lender’s commitment” to disclose the lender’s terms and conditions.

Answer 4

False - the document should include those terms and conditions.

Question 5

If a prospective mortgage was default insured by the CMHC, the insurance fee would have to be included in the cost of borrowing.

Answer 5

False - the cost of default insurance is not included in the cost of borrowing, as per regulation 191/08 Cost of Borrowing and Disclosure to Borrowers.

Question 6

Lawyer’s fees, excluding disbursements, must be included in the cost of borrowing.

Answer 6

False - Disbursements must be included.

Question 7

List the types of information (risks) that must be included in a borrower disclosure form.

Answer 7

• fees and payments associated with the mortgage
• the nature of the relationship between the mortgage brokerage and the lender under the proposed mortgage
• the role of the brokerage
• the number of lenders the brokerage represented during the previous year
• any potential conflicts of interest
• the risks associated with the proposed mortgage
• the terms and conditions of the proposed mortgage
• estimated costs
• the cost of borrowing

Question 8

Explain the timing requirements of providing disclosure to a borrower.

Answer 8

The disclosure must be provided to the borrower at least two business days before the borrower is required to make any payment or enter in the mortgage agreement; however, the two business days may be waived if the borrower consents in writing and the disclosure is still made before the borrower is required to make any payment or enter into the mortgage agreement

Question 9

List the specific costs that must be included when calculating the cost of borrowing

Answer 9

• administrative charges including charges for services, transactions or any other activity in relation to the mortgage
• lawyers’ fees, including disbursements, for a lawyer hired by the lender and paid by the borrower
• insurance charges, excluding default insurance premiums for high ratio mortgages
• appraisal, inspected or survey costs payable by the borrower, when required by the lender

Question 10

How must the cost of borrowing be expressed in the borrower disclosure form?

Answer 10

The cost of borrowing must be disclosed as an annual percentage rate, section 8.1 of Regulation 191/08 states that it must also be disclosed in dollars and cents over the course of the term for all fixed and variable rate mortgages.

Question 11

When or under what circumstances would a broker not have to supply his or her borrower with a borrower disclosure form?

Answer 11

If the brokerage does not require the borrower to pay for any of its services, including disbursements, transaction or other activities in relation to the mortgage, and the lender is a prescribed lender as found in section 1.2, and the lender provides its own disclosure that contains the information required by this disclosure, the brokerage is not required to provide the borrower with its own disclosure document.