Information on disclosures

Introduction 

Licensees providing mortgage services have specific duties that are set out in the Mortgage Services Act (MSA), Mortgage Services Regulation (Regulation), and Mortgage Services Rules (Rules). The MSA includes several disclosure requirements that help consumers understand their relationship with a broker, how the broker is compensated, and any risks or conflicts that may arise.

To assist licensees and consumers, several of these disclosures have been combined into approved disclosure form packages. Disclosure form packages offer a streamlined alternative to multiple individual disclosure forms, but they can only be used after the broker has disclosed whether they will represent the person as a client.

For more information on, and access to, the individual disclosure forms and disclosure form packages, please visit the Understanding Disclosure Requirements under the Mortgage Services Act webpage. Additional information on disclosures can be found on the Mortgage Services Knowledge Base. 

The information below outlines the disclosure requirements under the MSA.

Standard disclosure forms

The forms described below represent the disclosure forms most frequently used in mortgage transactions.

Disclosures in writing with mandatory forms

Representation disclosures

Before providing services related to dealing in mortgages (arranging a mortgage) or trading in mortgages (buying, selling, or exchanging mortgages), a broker must disclose whether they will represent the person as a client. This disclosure must be provided using a BCFSA-prescribed form.

A disclosure is not required when a broker is only answering general questions and has not started collecting information about the person’s goals, financial situation, qualifications, or mortgage needs.

If the broker will represent the person as a client, they must provide a Form 1 - Disclosure of Representation.  There are three versions of the form 1, depending on the person receiving the disclosure and the service being provided:

• Form 1A — Disclosure of Representation to Borrower (Dealing)
• Form 1B — Disclosure of Representation to Lender (Dealing)
• Form 1C — Disclosure of Representation to Lender (Trading) 

If the broker will not represent the person as a client, and the person is not represented by another licensee, the broker must provide them with a disclosure regarding the risks of being unrepresented in a BCFSA-prescribed form. This disclosure is not required if the unrepresented person is a permitted person, such as certain financial institutions or other entities, as defined in the Rules.

This disclosure must be provided using Form 2 - Disclosure of Risks to Unrepresented Parties. There are three versions of form 2, depending on the person receiving the disclosure and the service being provided:

• Form 2A – Disclosure of Risks to Unrepresented Borrower (Dealing)
• Form 2B – Disclosure of Risks to Unrepresented Lender (Dealing)
• Form 2C – Disclosure of Risks to Unrepresented Lender (Trading)

Remuneration disclosure to a borrower

When a broker presents one or more mortgage options or commitments to a borrower, the broker must provide the borrower with a disclosure explaining how the broker and brokerage will be remunerated. The disclosure must be provided in a BCFSA-prescribed form and include the following information:

• The remuneration to be paid to the brokerage and who will pay it;
• Any remuneration the brokerage will pay to another brokerage;
• The amount the brokerage will retain;
• The amount of the remuneration, or, if the amount is not yet known, the expected amount or how it will be calculated;
• Any remuneration the broker receives or expects to receive in connection with the mortgage; and
• Any other relevant information about the remuneration.

If the remuneration is paid in money, it must be disclosed as a dollar amount.

To make this disclosure, the broker must use Form 4 – Disclosure to Borrower of Expected Remuneration or one of the disclosure form packages, as appropriate.

Conflict of interest disclosures

Brokers must disclose conflicts of interest when they, or an associate or related party, as defined in the Rules, have or may acquire a direct or indirect interest in a mortgage transaction. The disclosure must be provided in a BCFSA-prescribed form and include the following information in a clear, accurate and not misleading manner:

• Description of any direct or indirect interest that the licensee or any associate or related party of the licensee has or may acquire in the transaction, and,

• Include any information and documents required by BCFSA.

There are specific requirements that must be met if the disclosure is being provided to a borrower or a lender.

Conflict of interest disclosure to borrowers

The disclosure must be provided at the earliest opportunity and no later than two business days before the borrower enters into a mortgage agreement or signs the mortgage documents, whichever occurs first.

Conflict of interest disclosure to lenders

The disclosure must be provided to the lender, at one of the following times:

• Before or at the time that a licensee delivers to a borrower the lender’s offer to lend to the borrower
• Before or at the time that a licensee delivers to the lender a borrower’s offer to borrow from the lender
• Before or at the time that a licensee delivers an offer by the lender to purchase an interest in a mortgage from a seller
• Before or at the time that a licensee delivers an offer to sell an interest in a mortgage to the lender

This disclosure is not required if every lender has received an offering memorandum or a prospectus in accordance with the Securities Act.

To make this disclosure, the broker must use Form 3A - Disclosure of Interests to Borrower or Form 3B - Disclosure of Interests to Lender, or one of the disclosure forms packages, as appropriate.

Information statement to lender

In certain mortgage transactions, an information statement must be provided to the lender. The statement must be provided in a BCFSA-prescribed form and disclosed at one of the following times:

• Before mortgage funds are released from trust, if the funds are held in trust or

• Before the lender advances the funds, if the funds are not held in trust

An information statement is not required in certain situations. These situations include when the lender is a permitted person as defined in the Rules or is the broker’s related mortgage brokerage, or where disclosure has already been provided under the Securities Act or for certain government-guaranteed mortgage investment products.

To make this disclosure, the broker must use Form 5 - Disclosure of Information Statement to Lender or one of the Disclosure Forms packages, as appropriate. In addition, brokers must use Form 5A - Addendum for Construction and Development Mortgages, where applicable.

Note that for consumer mortgages, brokers must also provide Business Practices and Consumer Protection Act financial disclosure (often referred to as total cost of credit and annual percentage rate disclosure). This disclosure is also typically made when presenting mortgages, but it must be made at least two business days before the borrower signs the mortgage agreement or makes a payment in connection with the mortgage. BCFSA does not provide a form for this disclosure because it is required under the Business Practices and Consumer Protection Act and brokerages generally have established processes and systems in place to provide this required disclosure.

Disclosures in writing with no mandatory forms

Suitability and material risks

Before recommending or presenting a mortgage or mortgage transaction to a borrower or lender, a broker must take reasonable steps to determine whether it is suitable for that person based on their needs, circumstances, and the risks involved.

A broker must disclose any material risks associated with the mortgage or mortgage transaction so the borrower or lender can make an informed decision.

There is no BCFSA prescribed form for this disclosure. However, brokers may choose to use Form 6A - Disclosure of Suitability and Material Risks to Borrower or 6B - Disclosure of Suitability and Material Risks to Lender, or one of the disclosure forms packages, as appropriate.

If brokers do not use a BCFSA optional form or a disclosure forms package, they must still disclose the material risks in writing to the borrower or lender.

These suitability and risk disclosure requirements do not apply in certain circumstances, including when the borrower or lender,

• is represented by another licensee
• is a licensee who has agreed, in a form approved by BCFSA, that the information is not required
• is a permitted person as defined under the Rules, or
• falls within other exemptions set out in the Rules

Disclosure of remuneration to a client

When a brokerage receives, or expects to receive, remuneration from any source other than their client directly for the mortgage services, it must promptly disclose this to their client. This includes remuneration arising from referrals or recommendations to people such as notaries, lawyers, banks, real estate agents, insurance agents, other mortgage brokers, mortgage brokerages, or any other person providing products or services related to mortgages.

There is no prescribed form for this disclosure. However, brokers may choose to use Form 7 – Disclosure to Client of Remuneration or a disclosure form package, as appropriate. 

Should a broker not use form 7 or an appropriate disclosure form package, disclosure is still required. The disclosure must be made in writing and contain the following information:  

• form or amount of remuneration 
• source of remuneration 

• if applicable, other important details about how the mortgage brokerage and broker are paid for providing mortgage services to the client or for any referrals or recommendations. 

Additional disclosure forms

The forms described below are less commonly used and are intended for specific purposes or circumstances.

Disclosure of the risks of dual agency

In limited circumstances, a mortgage brokerage may represent more than one client in the same mortgage transaction, which is called dual agency in the Rules. These circumstances include when the clients are located in a remote area that is under-served by brokers and it is not practical for different licensees to provide the services.

Before doing so, the brokerage must provide each client with a disclosure explaining why dual agency is permitted in this circumstance, the licensee’s responsibilities, and the risks involved. The brokerage must provide the disclosure to BCFSA. Each client must then sign a written dual agency agreement.

There is a prescribed form that brokers and brokerages must use to provide clients with this disclosure called Form 8 – Disclosure of the Risks of Dual Agency.

There is no prescribed form for the written dual agency agreement. It can be provided through a written service agreement or, where no service agreement exists, through a modified written disclosure of representation provided to the client (i.e., Form 1 - Disclosure of Representation). The agreement must clearly identify any duties that have been modified, explain how those duties have been modified, and specify any duties that no longer apply.