Chapter 5: Regulation and Legislation Flashcards
T/F: As of January 2009, a brokerage must disclose to a borrower if one of its agents will receive a fee from a lender in connection with the mortgage renewal.
True
T/F: Borrowers are entitled to the following information, only if they ask: brokerage name and license number.
False - this information must be provided under all circumstances.
T/F: It is a good idea for a brokerage to have a complaints process, but this is not required by law.
False - the MBLAA requires that all brokerages have a complaints process.
FSRA has the authority to refuse to grant a license to a brokerage if FSRA thinks the name might confuse the public with another existing brokerage.
True
A sole proprietorship must establish its eligibility for licensure as a mortgage brokerage whereas a corporation does not.
False - every entity applying for a brokerage license must establish its eligibility.
Under certain circumstances, FSRA may suspend a broker’s license without warning.
True
No changes may be made to the Regulations without going through the formal process of receiving Royal Assent.
False - the regulations may be amended without going through the process required for bills
FSRA is only concerned with one sector, the mortgage brokerage industry.
False - it regulates many other industries like the insurance industry.
Standards of Practice are guiding principles that businesses are encouraged to implement.
False - these are principles that a mortgage brokerage is required to implement. Failures to meet the standards of practice are deemed a contravention of the MBLAA and subject the brokerage to fines or other penalties.
Regulatory decisions by FSRA are final, based on the powers conferred upon the position.
False - Decisions may be appealed to the Tribunal or civil court.
As per the MBLAA, there are currently three different licenses in the mortgage brokerage industry.
False - there are 4 licenses:
brokerage, broker, agent and administrator.
FSRA (or its designate) may visit a brokerage within the FSRA registry to examine documents and records.
True
The principal broker designation was created by the MBLAA to address compliance issues within the brokerage.
True
The role of the brokerage may be defined as “taking steps, on behalf of another person or entity, to enforce payment by a borrower under a mortgage”
False - this is the definition of a mortgage administrator.
A mortgage agent may work only for one brokerage whereas a mortgage broker may be employed by several brokerages at the same time.
False - Both an agent and broker must only work for one brokerage at a time.
What are the educational requirements to obtain a mortgage agent’s license?
Individuals must take and pass an FSRA approved licensing course such as the REMICs RMAC course.
What is/are the difference(s) between a mortgage agent and a mortgage broker?
The difference is that a broker has additional education and has been a licensed agent for at least two years. In addition, a mortgage broker can hold the position of Principal broker and can manage agents.
Describe the duties and responsibilities of the principal broker.
This individual is responsible for all aspects of a brokerage’s compliance.
What is the difference between an offence under the MBLAA and an administrative penalty?
Administrative penalties are either “general” or “summary” and are covered in detail in Regulation 192/08 sections 1 – 6 while anyone who contravenes any of the sections as listed in section 48 of the MBLAA is considered to be guilty of an offence.
List the circumstances in which an individual would be deemed unsuitable to be granted a mortgage broker’s license?
A broker will be deemed unsuitable for a license if:
- the individual’s past conduct affords reasonable grounds for belief that he or she will not deal or trade in mortgage in accordance with the law and with integrity and honesty
- the individual is carrying on activities that contravene or will contravene the MBLAA or its Regulations
- the individual has made a false statement in his or her application for a license
Describe the complaints policy that a brokerage must have to comply with the MBLAA and its Regulations
The brokerage must have a complaints process so that if an individual makes a complaint to the brokerage in writing, the brokerage must respond in writing, also indicating that if the complainant believes that if the brokerage has contravened the MBLAA they may refer the complaint to the FSRA.
All complaints must be documented and handled by one or more authorized individuals.
What information must be included in every public relations item?
A brokerage must use its authorized name when conducting any business, and as of January 1, 2009, it must prominently include its authorized name and license number in all of its public relations materials.
If the brokerage is a franchise, it must state that it is independently owned and operated.
List the items that must be disclosed to a borrower in a disclosure document
The brokerage must inform the borrower, lender or investor, in writing, as to the “material risks of each mortgage or investment in a mortgage that the brokerage presents for the consideration of the borrower, lender or investor,” and obtain written acknowledgment that this disclosure has been made.
Other disclosure obligations include disclosure of the brokerage’s relationships, potential conflicts of interest, mortgages previously in default and of the cost of borrowing, the latter disclosure being very explicit.
Disclosure requirements are discussed in detail in Chapter 18: Borrower Disclosure, What must be disclosed.
What amount of errors and omission insurance must a brokerage have to comply with the MBLAA?
Errors and Omissions insurance must be a minimum of $1 million of coverage per year, and a minimum of $500,000 of coverage per occurrence.
It must also include a provision for loss resulting from fraudulent acts.