Chapter 2 - Mortgage Brokers Act & Professional Ethics

Question 1

Performing multiple roles in the same transaction or arranging a mortgage for a borrower and funding the same mortgage as a lender are examples of when a mortgage broker is in a CONFLICT OF INTEREST.

Question 2

The duty of professional courtesy and good faith is a part of the general duty to the PROFESSION

Question 3

Only individuals may be registered as sub-mortgage brokers

True

Question 4

The provincial agency with the authority to administer the Mortgage Brokers Act is BC FINANCIAL SERVICES AUTHORITY (BCFSA) formerly known as FICOM.

Question 5

Ethical codes of conduct DO NOT have the same force of law as statutes.

Ethical codes of conduct are voluntarily adopted by certain members of the public that wish to be part of a professional association. Like CPA or MB Association

Members of the public do not have the choice of voluntarily adopting the obligations contained in statutes.

Question 6

The two levels of activity requiring registration under the Mortgage Brokers Act are MORTGAGE BROKER and SUB-MORTGAGE BROKER

Question 7

The statute that prescribes disclosure to borrowers in the form of a Disclosure Statement, Notice or Statement of Account is the Business Practices and Consumer Protection Act

BPCPA.

Question 8

Most ethical codes of conduct are NOT passed by government agencies.

Most ethical codes of conduct are created by professional association

Question 9

Identify two types of penalties that a professional organizations disciplinary committee could impose on its members.

Fines
Suspension 
Reprimand 
Paying for the costs of the disciplinary hearing
Expulsion 
Complete disciplinary Education

Question 10

What is the largest voluntary professional organization of mortgage Brokers in B C

Mortgage Broker Association

MBA

Question 11

To be a Mortgage Broker you need to registered under which Act and by who?

Mortgage Brokers Act - Registration delegated to FICOM or BCFSA

1 Registered as Mortgage Broker - the company that has sub Mtg brokers working in.
2 Sub-Mortgage broker. Has to work for a Mtg Company.

Question 12

You are a Sub Mortgage Broker if you:

1 Carries on Business of buying and selling mortgages
2 Anyone who lends 10 or more mortgage’s from personal funds.
3 Earn commision of $1,000 from arranging a mortgage

Question 13

Mortgage Broker who has been disciplined by the Registrar of Mortgage Brokers can Appeal to

Financial Services Tribunal.

Question 14

Purpose of MBA

Advances and promotes the interests of the profession.

Public Protection

Set standards of conduct

Question 15

Exempt from Registration as Mortgage Brokers

1/ Banks, Credit Unions, Trust Companies
2/ Persons Acting for the Government
3/ Trustee in Bankruptcy
4/ Lawyer in the course of Practice as Real-estate law conveyances
5/ Persons lending money on land to provide housing for employees
6/ Realtors who facilitated the sale of a vendor take back mortgage

Question 16

Handling Trust Accounts

Must file annual audited financial statements.

Question 17

Disclosure To Borrow

No Prescribed Form
Business Practices and Consumer Protection Act - sets types of matters that need to be disclosed

Disclosure to lenders and investors — Form 9 — Sophisticated lender/investor exemptions

Conflict of Interest disclosure — Form 10

Question 18

Mortgage Broker Association Codes of Conduct

CRIPA

Duty of Confidentiality
Reputations of the Profession
Integrity and Due Care
Professional Competence
Advertising or Endorsements

Question 19

Relations with fellow members of Mortgage Broker Association

Courtesy and consideration
Do not make False or malicious statements about fellow members

Question 20

Organization and conduct of professional practice

Terms of engagement
Withdrawal of services

Question 21

Mortgage Broker is:

1/ Lends money secured by Mortgages
2/ Advertises himself as a Mortgage Broker
3/ Buying or Selling Mortgages
4/ In any year, receives $1,000 or more in fees
5/ during 1 year, lends money of 10 or more Mortgages
6/ carries on business collecting money secured by mortgages

Question 22

Mortgage Broker is a:

Company / Partnership / Sole Proprietorship

The company must have a sub-mortgage broker working for them

PAY 1000 for license.

Question 23

Sub Mortgage Broker

1/ only individuals

2/ must be employed by Mortgage Broker Company

If Employment terminated = suspension of license

Pay fee 1000

Question 24

Responsibilities of Mortgage Broker (company)

E 1/ Ensure all books and records are accurate and up to date

2/ Ensure all employees are registered under Mortgage Broker Act

3/ And informed of all the relevant MB legislation and regulations

Question 25

MB Act is

Provincial legislation that regulates the conduct of mortgage professionals in BC

It is for the protection of the public.

Question 26

Registrar of Mortgage Brokers

Ensuring that Mortgage Brokers meet requirements of MBA Act

Question 27

The Registrar of MB

The duties are performed by BC Financial Services Authority BCFSA, formerly FICOM

1/ can investigate breach of MBA Act
2/Attach conditions or restrictions to the registration 
3/ inspect all books of account
4/ seize any relevant information 
5/ freeze the trust funds
6/ decision appealable to the Financial Service Tribunal 
7/ Take your license away
8/ Not Supreme Court of BC

Question 28

BCFSA

• agency of provincial government
• governs the registration I of mortgage/sub mortgage brokers

Question 29

Breach of Mortgage Broker Act

1/ registration suspended or canceled
2/ pay fine, imprisonment
3/the wronged party may file a civil suit against the broker
4/ A bond maybe required from each broker involved
4/ registrar has the power to order a person who has breached the Act, to pay an administrative fee of up to $50,000

Question 30

MORTGAGE Brokers Association
Code of Ethics, Promotes the interests of MB professionals
Ethics is :

The science of morals;
study concerned with principles of human duty and
Moral principles by which a person is guided.

Question 31

Code of Ethics

1/ Provides guidelines to ensure that human actions are morally fair as well as lawful.

Maintain the Reputation of the Profession

Set a standard of conduct

The highest duty is owed to the public then to the client

Includes the Golden Rule —— do unto others

Question 32

Code of Ethics MBA

Duties:
Confidential Communications: the duty to the profession

Duty of Professional Courtesy and Good Faith

Disclosing All Options

Fiduciary Obligation to Clients

Duty to Advise fully, candidly, and honestly

Question 33

Discipline Committee. Of MBA

CANNOT TAKE YOUR LICENSE AWAY

Protect interest of the public
Act as educators
Not guilty until proven

Penalties of MBA
- suspension of membership (not take license away - only Registrar can do that.
-reprimand
— expulsion from the association
— require member take additional courses or training.
- pay cost of hearing
- complete education courses

Question 34

BPCPA Disclosure Requirements

Under BPCPA disclosure must be given by Brokers and lenders to individuals who borrow for primarily:
Personal
Family
Or Household purposes,

Regardless of whether the broker or lender is charging additional fees or expenses.

Question 35

Disclosure To Borrower under BPCPA

1/ Disclosure Statement, Notice of Stmt of Account

2/ 2 Days prior to borrower incurring an obligation under credit agreement unless the 2 day is waived.

3/ The rate of interest must be disclosed as an APR Annual Percentage Rate

4/ there are no prescribed forms.

Question 36

Disclosure to Lenders and Investors. FORM 9. (Borrower and Property Information)

Form 9

Sophisticated Person’s Are Exempt. You don’t need to send to them.

The disclosure must be given to Lender or Investor before any Advance is made,

A mortgage broker must retain a copy of the Form 9 for a period of 7 years.

Question 37

Sophisticated Person’s

Government/ Municipal Corporation

Savings Institutions

An Insurance Trust Company

Mortgage Broker Acting as principal

Person Registered under Securities Act

Question 38

Form 10. Conflict of Interest Disclosure to Borrowers and Lenders

Disclosure must be provided to each person who is borrower or lender in the transaction

Question 39

Form 10 Both Indirect and Direct interests must be disclosed

Recipient must sign form acknowledging receipt

Direct Interests

Commission fees, bonuses, rewards

A mortgage broker family member is the lender or has ownership interest

A Family member or business partner of Mortgage broker is the borrower

The Mortgage broker receives a fee from the borrower

Indirect interest:
Expected renewal fee.

Question 40

Disclosure Requirements on Advertisements

Mortgage broker are prohibited from making any false, misleading or deceptive statements in any advertising or any promotional material

Question 41

Duty of An agent

1. To follow all the laws while representing their clients
2. The highest duty is owed First to the public.

Question 42

Code of Ethics:

Written codes / guidelines voluntarily adopted by members of professional associations

As a minimum standard of behaviour necessary

To maintain the reputation of the profession as a whole in the public opinion

Question 43

Golden Rule

Do Unto Others as You Would Have Them Do Unto You.

Question 44

How is “Ethics” different from law?

While the law may prescribe the minimum standard of conduct of a certain individual, ETHICS CAN GO FARTHER AND REQUIRE A HIGHER MORAL STANDARD OF CONDUCT

Question 45

Professional Courtesy and Good Faith

— is a duty owed to one’s profession

— when one of its members does something calculated to cause injury to a colleague

— undertakings (special promises and understanding between professionals.

Question 46

Duty of Competence

— It is necessary that professionals be competent within their area of expertise.

— if this standard of service cannot be rendered, or a particular aspect is beyond a members expertise, the member is directed to decline offering their services and seek assistance of persons with expertise in the particular field.

Question 47

Duty of Confidentiality

— Derived from law of agency (Fiduciary Duty)

— includes the duty to keep confidential any facts or information

— the duty of confidentiality continues after the particular transaction is finished.

— the Only duty that will last for a life time

Question 48

Duty to Advise Fully and Honestly

Both good and bad news are imparted to client regardless of the fact that this degree of honesty may in occasion result Loss of business.

Question 49

If you feel you are not competent to do something

You should DECLINE

Question 50

Purpose of MB Act — protect the public by

— broker’s sub broker offering services meet certain minimum reasonable competency requirements

— setting out standards for brokers conduct.

registration, investigations of complaints, disciplinary powers- suspension, cancellation of registration and administrative penalties

Question 51

Sub mortgage broker (S-MB) should not be calling themselves as a Mortgage Broker.

S-MB is an individual not a company, partnership, corporations.

— is employed by a MB.

— Individual S-MB cannot register company as independent contractor working for a MB

Question 52

Sub Mortgage Broker Registration Fee is $1000.

Renewals ever 2 years

Question 53

Disclosure Requirements of MB and SMB
BPCPA — disclosure must be given to who borrow for PRIMARILY PERSONAL, FAMILY, or HOUSEHOLD PURPOSES

Whether the broker or lender is charging additional fees or expenses. This for protection of consumers.

Disclosure statement ( cost of credit). 
— a statement that must be given to a borrower incurring an obligation under a credit agreement as required BPCPA

Must be given 2 BUSINESS DAYS PRIOR TO BORROWER INCURRING AN OBLIGATION UNDER CREDIT AGREEMENT, unless 2 day period waived.

Question 54

Form 9 Disclosure to investors and Lenders

1. Arranges a mortgage in which another person is to be the mortgagee
2. Arranges a sale of a mortgagee’s interest in a mortgage to another person
3. Sells the mortgage broker own interest as mortgagee under a mortgage to another person— must provide disclosure to other person

Exemptions from Disclosure- Exemption
Govt Corp, municipalities, savings institutions, Credit Union etc., insurance company, Trust, persons registered securities leg.

Question 55

Form 10 - Conflict of interest Disclosure to Borrowers and Lenders

If the Mortgage Broker or Sub mortgage broker has any direct or indirect interest the broker may acquire in the transaction

Direct Interest— commissions, volume efficiency, loyalty or reward points, mortgage broker or family member is the LENDER; family member or business partner is the borrower.

Indirect Interest — Trailer fees (renewal fees)

Must be provided earliest opportunity to borrower and before release to of funds

Form kept 7 years/ up to $50000 penalties for no doing so.

Question 56

BPCPA
— Deceptive Acts under BPCPA
— Unconscionable Acts or Practices
— Misleading the Public
— Misleading the Lenders

an oral, written, visual, descriptive or other representation by a supplier, or
(b) any conduct by a supplier
that has the capability, tendency or effect of deceiving or misleading a consumer or guarantor;

Unconscionable Acts or Practices -undue Pressure on borrower to accept, took advantage

Misleading the Public — misleading Advertising

Misleading the Lenders — provides accurate info on Borrower

Question 57

Code of Ethics (COE)exist:
As it is possible to do wrong things without breaking the law.

COE is To improve this situation by providing a SET OF GUIDELINES TO ENSURE THAT HUMAN ACTIONS WILL BE MORALLY FAIR AS WELL AS LAWFUL

— SCIENCE OF MORALS
— Minimum standard of conduct.
— MBABC sets standard code
— Breaches of this code will result in disciplinary measures

Question 58

Why study COE — to promote the good reputation of mortgage brokers

MBABC emphasizes PROFESSIONALISM

1. PROFESSIONALISM
2. DUTY TO UPHOLD THE LAW
   — members will conduct business within applicable laws of Prov of BC and Canada and governing regulations FICOM/BCFSA

Question 59

Any act of misconduct of the governing laws and regulations may result in disciplinary action, criminal penalties and CIVIL lawsuit from Members of the PUBLIC

Question 60

Duty to CLIENT IN PROVIDING MORTGAGE SERVICES

1. Competence - offering service with a high degree of skill and expertise
2. Duty to Advise Fully, Candidly, and Honestly — ensure god/bad news given, be honest,
3. Fiduciary Obligation to Clients — a person who hold position of trust with respect to someone else and us obliged by virtue of the relationship of trust, to act solely in the clients benefit.
4. Disclosing all options
5. Confidential communication. The duty of Discretion.
6. Duty of professional courtesy and good faith

Good Faith- any promises made you should live up to it.

Question 61

Disclosure Requirement’s of the Mortgage Loan

1. Disclosure to Borrower
   — no prescribed form.
   — APR calculated and to include bonused mortgages
   — commissions and other fees.
   — BPCPA sets types of matters that need to be disclosed
2. Disclosure to Investors and Lenders (FORM 9)
   — don’t have to send to sophisticated lenders
3. Conflict of Interest Disclosure (FORM 10)
   — performing as a real estate agent or Insurance Agent and mortgage broker. Getting two commissions
   — arranging mortgage for a relative.
4. Misleading Public— must be truth in advertising. Under Competition Act can get criminal offences
   — Misleading Lenders - fake job letters or income

Question 62

Professional Ethics. MB

Duty to Uphold the Law
— MB Act
— FICOM Regulation & Policy
— Other Statute like Criminal Code

Duty to be Confidential
— don’t disclose about anyone.

Reputation of Profession
—don’t say bad things about other brokers.
— be courteous and consideration
— false or malicious statements

Integrity and Due Care

Professional Competence
— don’t do something you are not trained in

Organization and conduct of professional practice
— terms of engagement
— withdrawal of services

Question 63

Ethics — our character is the result of our conduct