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Disclosure FAQs
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MIC lender FAQS
I represent a Mortgage Investment Corporation (MIC) that lends money. The MIC’s related brokers work only with unrelated brokers who represent borrowers as clients. I have a few questions about disclosure forms/packages.
If the MIC’s related brokers are only working with represented borrowers, then the MIC may be required to provide one disclosure form, which is Form 3A – Disclosure of Interests to Borrower, but only if it applies. The MIC in this situation will never use a disclosure form package.
Instead, the borrower’s broker is responsible for the majority of the disclosure to the borrower and to the MIC lender in these circumstances. This is due to the following reasons:
- The MIC and its related brokers do not need to provide Form 1 – Disclosure of Representation because they are acting as a lender and do not have a third-party client in the transaction.
- The MIC also does not need to provide Form 2 – Disclosure of Risks to an Unrepresented Party when the borrower is represented by another mortgage broker.
- The borrower’s broker provides the required lender disclosure directly to the MIC when submitting the borrower’s mortgage application. Depending on whether any disclosure exemptions apply, the disclosure provided to the MIC may be:
- Package #4 – Disclosure to an Unrepresented Lender, or
- Individual disclosure forms, such as:
- Form 3B – Disclosure of Interests to Lender
- Form 5 – Disclosure Information Statement to Lender
- Form 6B – Disclosure of Suitability and Material Risks to Lender
- The MIC then provides:
- A mortgage commitment, including all required loan terms and information
- any financial disclosure required under the Business Practices and Consumer Protection Act, where applicable
- Form 3A — Disclosure of Interests to Borrower, if the MIC’s broker (or a related party or affiliate) has or expects to obtain an interest in the mortgage (outside of the MIC holding the mortgage), then they must disclose it.
- When presenting the mortgage commitment to the borrower, the borrower’s broker provides the borrower with the required borrower disclosure. This includes the Form 3A – Disclosure of Interests to Borrower that the MIC provided, if any. Depending on the circumstances and any applicable exemptions, this may be done using Package #1 – Disclosure to a Represented Borrower or the applicable individual disclosure forms.
The only situation where a MIC would be required to use a borrower disclosure package or forms is if they were dealing mortgages to a borrower who was not represented by any broker. In that situation, the MIC broker would first have to provide the borrower with Form 2A – Disclosure of risks to unrepresented borrower before providing any mortgage services. The broker could then perform mortgage services, where they would give the unrepresented borrower either:
- Package #3 – Disclosure to unrepresented borrowers or
- Individual disclosure forms, such as:
- Form 3A – Disclosure of Interests to Borrower
- Form 4 – Disclosure to borrower of expected remuneration
- Form 6A – Disclosure of suitability and material risks to borrower
- A MIC would be required to use a lender disclosure package/forms if another lender is involved in the mortgage transaction through trading in mortgages (buying, selling, or exchanging), unless they were exempt from some of all of the lender disclosure (e.g., a permitted person).
The broker representing the borrower is always responsible for conducting the suitability assessment. It does not matter whether it is an original mortgage or a renewal.
The only time a MIC lender would provide a suitability assessment to a borrower is if the borrower was not represented by any broker. As noted above, the MIC would first have to provide the borrower with a Form 2A – Disclosure of risks to unpresented borrower. The broker could then provide mortgage services, where they would give the unrepresented borrower either:
- Package #3 – Disclosure to unrepresented borrowers or
- Individual disclosure forms, such as:
- Form 3A – Disclosure of Interests to Borrower
- Form 4 – Disclosure to borrower of expected remuneration
- Form 6A – Disclosure of suitability and material risks to borrower
BPCPA Financial Disclosure FAQs
It depends on the circumstances. Both brokers and lenders may have BPCPA disclosure obligations, and borrowers must receive the required information before entering into the mortgage agreement.
No mortgage broker (unrepresented borrower): if there is no broker involved in arranging a consumer mortgage loan on behalf of the borrower (i.e., the borrower goes directly to the lender and has no representation), the lender is responsible for providing the BPCPA disclosure.
Broker and lender carrying on business: if a broker arranges a mortgage for a borrower client with a lender who is in the business of lending mortgage money, the lender is responsible for BPCPA disclosure. However, the broker is required to advise the lender of their brokerage fee so the BPCPA disclosure is accurate.
The lender can rely on the broker’s disclosure and share responsibility for it, or the lender can give the borrower separate BPCPA disclosure of its own. If the lender provides its own BPCPA disclosure, the broker must reconcile this with previous BPCPA disclosure. Borrowers should never receive more than one cost of credit disclosure with different amounts.
For more information, see Division 5 of the BPCPA: Full Multi — Business Practices and Consumer Protection Act.
Broker and lender not carrying on business (e.g., “private” individual who is exempt from MSA licensing): if a broker arranges a mortgage with a lender who does not carry on the business of lending mortgage money, the broker is responsible for providing BPCPA disclosure. If the borrower pays a brokerage fee, the broker must ensure the disclosure:
- states the amount of the brokerage fee; and
- includes the brokerage fee when calculating the total cost of credit and APR.
In practice, when a broker arranges a mortgage on behalf of their borrower client with a “private” lender who is not represented by another broker, they step into the lender’s disclosure role and must ensure the borrower receives accurate BPCPA disclosure.
Co-brokering: when two licensed mortgage brokers work together on the same side of the mortgage transaction, they are both responsible for all disclosure.