Borrower Disclosure Requirements
Brokerages must provide borrower disclosure and obtain written acknowledgment for mortgage suitability, conflict of interest, commissions, and the cost of credit. Any reference to a brokerage automatically applies to mortgage brokers and mortgage associates employed by that brokerage.
Timing of disclosure
All required disclosures made to a borrower must be made no later than two business days before the borrower enters into a mortgage agreement.
A borrower may waive the time period for delivery of the disclosure if:
- the borrower has received independent legal advice regarding the effect of the waiver, and a statement to that effect (signed by the lawyer providing that advice) is attached to the waiver
- the mortgage provides the borrower with prepayment rights that provide that:
- the borrower can prepay the outstanding balance at any time without any prepayment charge or penalty
- upon paying the outstanding balance, the lender will refund or credit (calculated in accordance with the regulations) the borrower with a portion of any non-interest finance charges paid by the borrower or added to the outstanding balance
- the borrower is entitled, on any scheduled payment date, or at least monthly, to prepay a portion of the outstanding balance, without any prepayment charge or penalty
- any obligation will be extinguished and any payments will be refunded to the borrower if the borrower notifies the lender within 2 business days after receiving the disclosure statement that the borrower intends to withdraw from or does not intend to enter into the credit agreement
In all cases, a waiver is effective only if it is in writing and signed by the borrower. When a borrower has a right to withdraw from or to not enter into the agreement, the waiver document must clearly and prominently disclose that fact.
Maintenance of records
A brokerage shall retain the books, records and documents for a minimum period of seven years after the date of the transaction.
Format of disclosure
All required documents must express information clearly, concisely, in a logical order and in a manner that is likely to bring the information to the reader’s attention.
A brokerage must take reasonable steps to ensure that any mortgage that it presents to a borrower or private investor is suitable, taking into consideration the unique needs and circumstances of the borrower or private investor.
A brokerage must identify, from a selection of proposed mortgage options available to the borrower, the mortgage that is most suitable for the borrower, based on consideration of all of the following features of the proposed mortgage:
- whether the mortgage is conventional or high ratio
- the interest rate
- whether the interest rate is fixed or variable
- if the interest rate is variable, a description of how the formula for calculating a variable rate mortgage may change during the term of the mortgage
- the term of the mortgage
- whether the mortgage is closed, partially open or fully open
- the amortization period
- the fees, remuneration, or penalties payable by the borrower in connection with any existing mortgage or the proposed mortgage
- the fees, remuneration, or penalties payable by the borrower in connection with the services offered by the brokerage
- in the case of a reverse mortgage, an estimate of the accumulated interest for the term of the loan
- any other options or distinguishing features of the available mortgage
The brokerage must provide the borrower with a written assessment of the suitability of a proposed mortgage option and must obtain the borrower’s written acknowledgement that the brokerage made the suitability disclosure. This acknowledgement must be kept on file at the brokerage.
Conflict of interest disclosure
Every brokerage must provide a borrower with the following information in writing:
- whether the brokerage is directly or indirectly owned, in whole or in part, by a mortgage lender or private investor and, if it is, the name of that mortgage lender or private investor
- the total number of lenders and private investors to which the brokerage is capable of submitting a mortgage application at the time the information is provided to the borrower
- the names of the lenders and private investors mentioned in the previous bullet
- the steps that the brokerage took to confirm the identity of the lender and private investor and whether the brokerage was able to obtain that confirmation
- whether the brokerage or any related person has, or may have, an interest in a mortgage or related mortgage transaction and, if so, the nature of that interest
- the fees, remuneration, or penalties payable by the borrower in connection with the services offered by the brokerage for the proposed mortgage
The brokerage must obtain the borrower’s written acknowledgement that the brokerage made the conflict of interest disclosure.
A brokerage must give the following information, in writing, to a borrower in connection with a mortgage or mortgage renewal that it presents for the borrower’s consideration:
- whether the brokerage has received, may receive or will receive a fee or other remuneration, directly or indirectly, from a person in connection with the negotiation or arrangement of the mortgage or mortgage renewal
- if a fee or other remuneration is or may be payable to the brokerage, the identity of the other person, the basis for calculating the amount of the fee or other remuneration and, in case of a benefit other than money, the nature of the benefit
- whether a broker or associate who is authorized to act on the brokerage’s behalf has received, may receive, or will receive payment of an incentive from another person in connection with the negotiation or arrangement of the mortgage or mortgage renewal
- if an incentive is or may be payable to a broker or associate, the nature of the incentive, and the identity of the other person
The brokerage must obtain the borrower’s written acknowledgement that the brokerage made the commission disclosure.
Cost of credit disclosure
If the brokerage takes a loan application from a borrower and forwards it to the lender, the brokerage must give the borrower an initial disclosure statement (see requirements below). The fact that a brokerage has provided an initial disclosure statement does not necessarily discharge the lender’s duty to give a disclosure statement to the borrower. The lender has the option of adopting the brokerage's disclosure statement as its own or providing its own disclosure statement.
A brokerage, whose involvement in a transaction is limited to referring a prospective borrower to a prospective lender, is not required to provide a disclosure statement to the borrower, even if the brokerage charges for this service.
Brokerage fees (e.g., file opening fees and commissions) are to be disclosed by the brokerage and accounted for in calculating the annual percentage rate (APR) where the brokerage collects a brokerage fee directly from the borrower.
A brokerage that is required to provide a cost of credit disclosure statement must ensure that the statement is in writing, or, with the consent of the borrower, in any other form that allows the borrower to retain the statement for future reference.
Initial disclosure statement requirements
A brokerage must ensure that the initial disclosure statement for a mortgage contains the following information:
- the effective date of the statement
- the outstanding balance as of the effective date, taking into account every payment made by the borrower on or before the effective date
- the nature and amount of each advance, charge, or payment taken into account in the outstanding balance
- the term
- the amortization period if it is longer than the term
- the date on which interest begins to accrue and the details of any grace period
- the annual interest rate and the circumstances under which interest will be compounded
- if the annual interest rate may change during the term:
- the initial annual interest rate and the compounding period
- the method of determining the annual interest rate at any time
- unless the amount of scheduled payments is adjusted automatically to account for changes in the annual interest rate, the lowest annual interest rate, based on the initial outstanding balance, at which the payments would not cover the interest that would accrue between payments
- the nature and amount of any charges, other than interest, that will become payable by the borrower in connection with the mortgage
- the amount and timing of any advances to be made after the effective date
- the amount and timing of any payments to be made after the effective date
- the total of all advances made or to be made in connection with the mortgage
- the total of all payments to be made in connection with the mortgage
- the total cost of credit
- the APR
- the nature of any default charges provided for by the mortgage
- a description of the subject matter of any security interest
- a statement of the conditions, if any, under which the borrower may make prepayments, and any charge for prepayment
- the nature, amount and timing of charges for any optional services purchased by the borrower that are payable to or through the lender
- the conditions under which the borrower may terminate optional services
Estimates and assumptions permitted
A brokerage may base information on an estimate or assumption if the disclosure depends on information that is not ascertainable by the broker at the time of disclosure, and the estimate or assumption is reasonable and is clearly identified as an estimate or assumption.