Chapter 5 Key Terms & Definitions

Question 1

Administrative penalties

Answer 1

A penalty assessed by FSRA for less serious contraventions of or failures to comply with the MBLAA

Question 2

Authorized name

Answer 2

The name authorized to be used by FSRA. Typically, this is the name found on the licensee’s license

Question 3

Borrower

Answer 3

The individual responsible for the receipt and repayment of mortgage proceeds

Question 4

Complaint

Answer 4

A disagreement or statement of dissatisfaction with with a brokerage or Administrator. Both much have policies and procedures in place to deal with complaints.

Question 5

Compliance

Answer 5

Conforming to the MBLAA and its Regulations

Question 6

Corporation

Answer 6

A legal business entity created under federal or provincial statutes

Question 7

Cost of borrowing

Answer 7

The MBLAA defines the cost of borrowing as “the interest or discount applicable to the mortgage; any amount charged in connection with the mortgage that is payable by the borrower to the brokerage or lender, where the amount is chargeable, directly or indirectly, by the person to the brokerage or lender, and; any charge prescribed as included in the cost of borrowing, but does not include any charge prescribed as excluded from the cost of borrowing. It must be disclosed as either a percentage or in dollars and cents depending on the disclosure requirements of the Regulations.”

Question 8

Deemed trust funds (also see trust funds)

Answer 8

Funds that are deemed to be payable to another party. These funds must be kept in a separate trust account.

Question 9

Disclosure

Answer 9

The act of making something evident. There are several disclosure requirements mandated by the MBLAA and its Regulations with relation to a mortgage being recommended to a borrower, investor or lender by a brokerage.

Question 10

Disclosure form

Answer 10

A form, prescribed or otherwise, used to provide disclosure to a borrower, lender or investor, as the case may be, in accordance with MBLAA and its Regulations.

Question 11

Errors and Omissions Insurance

Answer 11

Insurance that provides coverage for errors and omissions make by a brokerage, broker, agent, or Administrator. This insurance must contain a provision for fraud.

Question 12

Financial guarantee

Answer 12

A requirement under the MBLAA in regard to mortgage administrators requiring licensees to have at least $25,000 in unimpaired working capital or in another form as approved by FSRA.

Question 13

Financial Services Tribunal

Answer 13

An independent, adjudicative body that hears appeals of regulatory decisions by FSRA

Question 14

FSRA

Answer 14

The Financial Services Regulatory Authority of Ontario (formerly FSCO). As of June 8, 2019, this is the regulatory body that oversees the mortgage brokerage industry and enforces the Mortgage Brokers, Lenders and Administrators Act, 2006 (formerly the Mortgage Brokers Act), as well as several other industries and acts.

Question 15

Guarantees

Answer 15

In regard to the MBLAA, a promise to pay. Guarantees are prohibited under several circumstances including a brokerage, broker, agent or Administrator guaranteeing payment from a borrower to an investor.

Question 16

Investor (also see Lender)

Answer 16

An individual or entity lending money using a mortgage as security

Question 17

Lender (also see Investor)

Answer 17

An individual or entity lending money using a mortgage as security

Question 18

Licensure

Answer 18

Permission granted by an agency of government to an individual to engage in a given profession or occupation

Question 19

Limited Partnership

Answer 19

An association of two or more partners formed to conduct business jointly and in which one or more of the partners is liable only to the extent of the amount of money they have invested

Question 20

MBLAA

Answer 20

The abbreviation of the Mortgage Brokerages, Lenders and Administrators Act, 2006, the legislation regulating the activity of mortgage brokerages, lenders and Administrators.

Question 21

Morgage Administrator

Answer 21

An individual or entity that enforces payments by borrowers on behalf of lenders or investors. Mortgage administrators must be licensed.

Question 22

Mortgage agent

Answer 22

Individuals who are remunerated for dealing in mortgages or trading in mortgages in Ontario, as employees or otherwise. Mortgage agents are restricted in their abilities by MBLAA and its Regulations and must be supervised by a licensed mortgage broker. Mortgage agents must be licensed.

Question 23

Mortgage broker

Answer 23

Individuals who are remunerated for dealing in mortgages or trading in mortgages in Ontario, as employees or otherwise. A mortgage broker may hold the position of principal broker and may supervise licensed mortgage agents. Mortgage brokers must be licensed.

Question 24

Mortgage brokerage

Answer 24

Corporations, partnerships, sole proprietorships and prescribed entities that carry on the business of dealing in mortgages, trading in mortgages or lending money on the security of real property

Question 25

Partnership

Answer 25

A type of business entity in which the partners (owners) share with the each the profits or losses of the business undertaking in which all have invested

Question 26

Policies and Procedures

Answer 26

A policy is a plan or course of action, while procedure is a step by step process on how to perform a certain task. Under the MBLAA, brokerages and Administrators must have a set of documents that describe an organization’s policies for operation and regulatory compliance, and the procedures necessary to fulfill the policies

Question 27

Principal broker

Answer 27

A title held by the licensed mortgage broker responsible for ensuring that the brokerage, and all brokers and agents comply with the requirements of the MBLAA, including ensuring that any contraventions of the Act are dealt with, and that the brokerage has proper policies and procedures in place to ensure that all brokers and agents are adequately supervised and that they comply with every requirement under the MBLAA. There may be only one principal broker per brokerage who must be identified to FSRA.

Question 28

Proprietor

Answer 28

A sole owner of an unincorporated business, also called a sole proprietor

Question 29

Public register of licensees

Answer 29

A registry to be maintained by FSRA that provides access to licensee information

Question 30

Public relations

Answer 30

As defined in Regulation 188/08, any advertisement by the brokerage in connection with its business as a brokerage that is published, circulated or broadcast by any means, or any material that a brokerage makes available to the public in connection with its business as a brokerage.

Question 31

Regulated activities

Answer 31

As defined by the MBLAA, any activities that require a license which are currently defined as dealing or trading in mortgages and mortgage lending

Question 32

Simple referral

Answer 32

A term used to describe the act of referring a potential borrower to a potential lender, or vice versa. This person does not need to be licensed if he or she informs the other party, in writing, that a fee will be received for the referral, the nature of the relationship between the parties, and as long as the only other information provided is the name, address, telephone number, fax number, email address or website address of the individual being referred.

Question 33

Sole proprietorship (also see Proprietor)

Answer 33

A sole owner of an unincorporated business, also called a proprietor

Question 34

Standards of Practice

Answer 34

Regulation 188/08, which applies to mortgage brokerages, Regulation 187/07, which applies to mortgage agents and brokers, and Regulation 189/08, which applies to mortgage administrators constitute the Standards of Practice under the MBLAA. These Regulations detail the business rules that licensees must follow to comply with the MBLAA and its Regulations.

Question 35

Trade completion date

Answer 35

Regulation 188/08 defines the trade completion date as the earlier of: a) the date on which an investor, or a brokerage on behalf of an investor, enters into an agreement to trade in the mortgage, or b) the date on which the trade in the mortgage is completed

Question 36

Trust account

Answer 36

A bank account held by a brokerage or Administrator for the purposes of keeping money held on behalf of clients separate from the funds of a professional or his or her business

Question 37

Trust fund (or account) reconciliation

Answer 37

A written record of all deemed trust funds received, and all transactions relating to the funds, summarized and checked for accuracy

Question 38

Trust funds (also see deemed trust funds)

Answer 38

Funds that are deemed payable to another party. These funds must be kept in a separate trust account.

Question 39

Vendor take-back (VTB)

Answer 39

Where the seller of the property provides all or some of the financing to the purchaser in order to sell the property. The arranging of a VTB by a real estate salesperson is an exempted activity under the MBLAA as long as certain conditions are met.

Question 40

Designate class of lenders and investors

Answer 40

A term used to describe specific lenders and investors that may be exempt from certain requirements under Regulation 188/08, section 2.(1) which states “2. (1) For the purposes of this Regulation, a person or entity is a member of a designated class of lenders and investors if the person or entity is a member of any of the following classes:

1. The Crown in right of Ontario, Canada, or any province or territory of Canda
2. A brokerage acting on its own behalf
3. A financial institution
4. A corporation that is a subsidiary of a person or entity described in paragraph 1, 2, or 3
5. A corporation that is approved under the National Housing Act (Canada).
6. An administrator or trustee of a registered pension plan within the meaning of subsection 248 (1) of the Income Tax Act (Canada)
7. A person or entity who is registered as an adviser or dealer under the Securities Act when the person or entity is acting as a principal or agent or trustee for accounts that are fully managed by the person or entity
8. A person or entity who is registered under securities legislation in another province or territory of Canada with a status comparable to that described in paragraph 7 when the person or entity is acting as a principal or as an agent or trustee for accounts that are fully managed by the person or entity
9. A person or entity, other than an individual, who has net assets of at least $5 million as reflected in its most recently-prepared financial statements and who provides written confirmation of this to the brokerage
10. An individual who, alone or together with his or her spouse, has net assets of at least $5 million and who provides written confirmation of this to the brokerage
11. An individual who, alone or together with his or her spouse, beneficially owns financial assets (being cash, securities within the meaning of the Securities Act, the cash surrender value of a life insurance contract, a deposit or evidence of a deposit) that have an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $1 million and who provides written confirmation of this to the brokerage
12. An individual whose net income before taxes in each of the two most recent years exceeded $200,000 or whose net income in each of those years combined with that of his or her spouse in each of those years exceeded $300,000, who has a reasonable expectation of exceeding the same net income or combined net income, as the case may be, in the current year and who provides written confirmation of this to the brokerage
13. A person or entity in respect of which all the owners of interests, other than the owners of voting securities required by law to be directors, are persons or entities described in paragraphs 1 to 12. O. Reg 188/08, s. 2.(1).”