Printed . This content is updated regularly, please refer back to https://bcfsa.ca to ensure that you are relying on the most up-to-date resources.
Guideline on Representation Disclosures
Select the section you’d like to navigate to.
Accordion items
Purpose
Licensees providing mortgage services have obligations under the Mortgage Services Act (MSA), Mortgage Services Regulation (Regulation), and Mortgage Services Rules (Rules) regarding representation disclosures to clients and non-clients. This guideline provides guidance to licensees on
- understanding representation disclosure requirements
- providing Disclosure of Representation and
- providing Disclosure of Risks to Unrepresented Parties.
For more information on disclosure requirements, visit the BCFSA Mortgage Services Knowledge Base.
Guideline
Understanding representation disclosure requirements
Before a licensee provides the services of dealing in mortgages (arranging a mortgage) or trading in mortgages (buying, selling, or exchanging mortgages) to or on behalf of someone, they must disclose whether they will be representing that party as a client.
Representation disclosure helps clients understand who the broker is acting for before mortgage services are provided. Brokers should clearly explain their role in the transaction, including whether they are acting for a borrower, a lender, or another party, so that clients understand the nature of the relationship and the duties owed to them. By providing this information early, brokers can promote transparency, set clear expectations, and help clients make informed decisions.
Effective representation disclosure also demonstrates professionalism and can strengthen consumer confidence by ensuring clients have a clear understanding of the broker’s role and responsibilities throughout the transaction.
Providing disclosure of representation
The disclosure establishing a client relationship is made using the Form 1 — Disclosure of Representation.
There are three different versions of the Form 1, depending on the party receiving the disclosure (borrower or lender) and the service being provided (dealing or trading):
The content of Forms 1A, 1B, and 1C are tailored to each situation and party to the transaction, but are largely similar.
One distinguishing element in Form 1A – Disclosure of Representation to Borrower is that it contains information about the mortgage broker’s and brokerage’s relationships with any lender that has funded 20 per cent or more of the mortgages arranged by the broker or brokerage. While the form does not include a timeframe for the calculation of this metric, licensees should calculate this based on the previous year of transactions. Licensees can use either the calendar year (12 months prior to disclosure) or the brokerage’s immediately preceding fiscal year, and disclose the method used on Form 1A.
If one or more lenders did fund 20 per cent of the mortgages in the last year, then the broker must list the lender names, percentage of mortgages funded, and the reason(s) why the lender is funding 20 per cent or more of the mortgages the related licensees helped arrange (e.g. volume bonus, ownership interest, specialize in specific type of lending, etc.).
When a representation disclosure form is required
Form 1A is required every time a mortgage broker intends to represent a borrower as a client.
Form 1B — Disclosure of Representation to Lender (Dealing) and Form 1C — Disclosure of Representation to Lender (Trading) are required when the mortgage broker is dealing or trading a mortgage on behalf of a lender. This includes people who are not carrying on the business of lending.
Brokers can answer a consumer’s general questions without providing a Representation Disclosure form. However, when a broker moves from providing general information to doing things like gathering personal information, assessing options, or providing advice, they must give the client a Representation Disclosure form.
For example, a broker must provide a Representation Disclosure form before they start asking about a person’s motivation for getting a mortgage or requesting information about their financial situation or qualifications (such as income or credit history).
When a Disclosure of Representation is not required
As noted above, mortgage brokers do not need to provide Disclosure of Representation if they are only answering general questions and are not asking for or receiving detailed personal information about finances, motivations or specific needs.
The following are some examples of general questions mortgage brokers may answer without providing a representation disclosure:
- What experience do you have as a mortgage broker?
- What types of fees do mortgage brokers charge?
- What are the current mortgage rates?
- What is the difference between a fixed rate and a variable rate?
- Are there always penalties if I want to pay off a mortgage early?
- As long as a broker’s responses remain factual and general a representation disclosure is not required.
Providing Disclosure of Risks to Unrepresented Parties
Before providing mortgage services to someone who is not their client and is not represented by another licensee, the broker must provide Form 2 – Disclosure of Risks to Unrepresented Parties.
There are different versions of Form 2, depending on the service being provided (dealing or trading) and the party receiving the disclosure:
- Form 2A — Disclosure of Risks to Unrepresented Borrower (Dealing);
- Form 2B — Disclosure of Risks to Unrepresented Lender (Dealing); and
- Form 2C — Disclosure of Risks to Unrepresented Lender (Trading).
The content of forms 2A, 2B, and 2C are tailored to each situation and party to the transaction but are largely similar.
However, similar to Form 1A, Form 2A – Disclosure of the Risks to Unrepresented Borrower must contain additional information about the mortgage broker and brokerage’s relationships with lenders. The broker must indicate whether they offer mortgage options funded by their own brokerage, submit applications to lenders they have relationships with, or use another approach, which they must describe.
In addition, Form 2A must include information about the mortgage broker and brokerage relationships with any lender that has funded 20 per cent or more of the mortgages arranged by the broker or brokerage in the 12 months immediately preceding the date of the disclosure. As noted above, licensees can use either the calendar year (12 months prior to disclosure) or the brokerage’s immediately preceding fiscal year, and disclose the method used on Form 2A.
If the 20 per cent threshold has been met, then the broker must list the lender name(s), percentage of mortgages funded, and the reason(s) why, if any, the lender is funding 20 per cent or more to the mortgages the related licensees helped arrange.
When a Disclosure of Risks to Unrepresented Parties Is required
Form 2A disclosure is required where a broker is arranging a mortgage on behalf of their lender client or related brokerage and the borrower in the transaction is unrepresented.
Form 2B disclosure is required If a broker is representing a borrower in a transaction, and the lender is unrepresented by a broker and not considered a permitted person under the Rule. This includes private individuals or entities that are not carrying on the business of lending.
When a Disclosure of Risks to Unrepresented Parties is not required
Brokers do not need to provide the Disclosure of Risks to Unrepresented Parties when the unrepresented party is another mortgage services licensee or a “permitted person” as defined under the Mortgage Services Rules.
As well, similar to the guidance provided above with respect to representation disclosure, brokers do not need to provide Disclosure of Risks to Unrepresented Parties if they are only answering general questions and are not asking for or receiving detailed personal information about a person’s financial situation, motivations, or specific needs.
Applicable Section of Mortgage Services Act, its Regulations, or the Mortgage Services Rules
MSA Rules
“Permitted person” Rules s. 1
s. 68 [disclosure of representation – dealing in or trading in mortgages]
s. 69 [disclosure of risks to unrepresented parties]