As a mortgage broker, it’s your job to connect clients with lenders and help them secure the best possible mortgage for their needs. However, it’s important to keep in mind the legal aspects of mortgage financing and how they affect your role. In this guide, we’ll take a look at compliance requirements, licensing, and regulations in Canada, as well as common legal pitfalls to avoid.
Compliance Requirements:
Compliance is a crucial aspect of mortgage financing that brokers should be aware of. It’s important to ensure that all parties involved in the transaction, including the borrower, lender, and broker, comply with all applicable laws and regulations. For example, brokers must provide full disclosure to borrowers regarding interest rates, fees, and penalties associated with their mortgages. They must also comply with all applicable privacy laws and protect clients’ personal information.
Licensing:
Mortgage brokers are required to be licensed in Canada, which involves meeting certain education and experience requirements and passing an exam. Each licensing requirement is dependent on the province you will be working in. A useful tool to gauge all requirements for working as a mortgage broker in the provinces is WOWA’s how to become a mortgage broker article. It’s important to maintain your license and stay up to date with any changes to licensing requirements. Failure to comply with licensing requirements can lead to legal issues and jeopardize your career.
Regulations:
Mortgage brokers must also comply with various regulations, such as those set by the Financial Consumer Agency of Canada (FCAC) and the Canadian Mortgage and Housing Corporation (CMHC). These regulations cover a range of topics, including advertising, disclosure requirements, and conflict of interest policies. It’s important to stay informed about any changes to regulations and ensure that your business practices align with them.
Legal Pitfalls to Avoid:
Some common legal pitfalls for mortgage brokers to look out for include inaccurate details, paperwork problems, changing fine details in an agreement, and lending discrimination. Inaccurate details can lead to unexpected changes in monthly payments and possible legal action. The mortgage lender might promise specific numbers in the lending process or even a lower interest rate. But not all promises are guaranteed. When there is no written explanation of what the two parties agreed to, this matter can lead to further disruptions.
Paperwork problems can result in disruptions to the lending process, while changing fine details in an agreement can lead to predatory lending methods and valid lawsuits against the lender. For example, the lender might have made the modifications to ensure that the loan would proceed without considering how these changes could impact the borrower’s ability to repay the loan. If the borrower cannot make these payments, this could be attributed to predatory lending methods, which negatively impact the borrower. Lastly, lending discrimination, intentional or not, can lead to complaints and potential legal action. Under the Equal Credit Opportunity Act, lenders can’t base credit and loan approvals on a person’s or entity’s characteristics. If the potential borrower feels they have suffered discrimination in some form on their application, they may file a complaint against the broker. If you’d like to learn more on some common legal pitfalls, check out our 5 common legal pitfalls article!
The Role of a Real Estate Lawyer:
To avoid these legal pitfalls, it’s crucial to have a real estate lawyer on call to discuss the intricacies of each transaction. A lawyer can provide valuable guidance and support throughout the lending process and help protect your client’s interests.
At Endhome.ca, we offer expert real estate lawyers who can provide the legal support and guidance you need to succeed in your role as a mortgage broker. Our use of digital signing can assure that your paperwork is up-to-date and ready when you need it. Contact us today to learn more!