Chapter 18: Borrower Disclosure Flashcards
List the types of information (e.g., risks) that must be included in a borrower disclosure form.
(8)
fees and payments associated with the mortgage
the nature of the relationship between the brokerage and 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
List the specific costs that must be included when calculating the cost of borrowing.
(3)
administrative charges including charges for services, transactions or any other activity in relation to the mortgage
lawyer’s fees, including disbursements, for a lawyer hired by the lender and paid by the borrower (the majority of cases)
insurance charges, excluding default insurance premiums for high-ratio mortgages
appraisal, inspection or survey costs payable by the borrower, when required by the lender
If a cost is unknown, how must it be disclosed?
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.
When does a brokerage have to disclose the name of any lender that it’s used to fund over 50% of the mortgages it brokered in the previous fiscal year?
Section 19.3 of Regulation 188/08 states that upon request, “a brokerage shall disclose the following information in writing to a borrower:
Whether the brokerage itself was the lender for more than 50 per cent of the total number of mortgages and mortgage renewals completed by the brokerage during the previous fiscal year.
The name of the lender, if any, with whom the brokerage arranged mortgages during the previous fiscal year if the mortgages constituted more than 50 per cent of the total number of mortgages and mortgage renewals completed by the brokerage during the previous fiscal year. O. Reg. 188/08, s. 19 (3).”
There are three possible relationships that a brokerage may have with a borrower. List them.
Acting for the lender
Acting for the borrower
Acting for both the borrower and the lender
Discuss how brokerage fees are regulated by the MBLAA.
They are not regulated by the MBLAA
What legislation prohibits the cost of borrowing from exceeding 60% APR?
The Criminal Code of Canada. Section 347 of the Criminal Code makes it a criminal offense to charge in excess of 60%, which for a mortgage includes the fees and costs payable by the borrower in addition to the interest charged by the lender. This figure is represented in the borrower disclosure as the cost of borrowing.
True or False Questions
The role of the brokerage must be disclosed to the borrower.
True – the Borrower must be informed who the brokerage is working for, the Borrower or the Lender or both
True or False Questions
The nature of the relationship between the brokerage and the borrower must be included in the disclosure document to the borrower.
False. The nature of the relationship between the brokerage and the lender must be disclosed in the borrower disclosure document.
True or False Questions
A brokerage fee must be disclosed to the borrower and included in the cost of borrowing.
True
True or False Questions
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.
False – the document should include those terms and conditions
True or False Questions
If a prospective mortgage was default insured by CMHC, the insurance fee would have to be included in the cost of borrowing.
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.
True or False Questions
Lawyer’s fees, excluding disbursements, must be included in the cost of borrowing
False – Disbursements must be included
True or False Questions
It is not necessary to include an exact dollar amount in the cost of borrowing if the cost is unknown
False – it must be shown in dollars and cents as well as a rate
True or False Questions
The borrower disclosure must be given to the borrower at least 72 hours before they can enter into the mortgage
False – it must be provided two business days, which may be waived in writing
