Self-Serve Portal

Private Investor Disclosure Requirements

Brokerages must provide private investors disclosure and obtain written acknowledgment in regards to mortgage investment suitability, investor disclosure, renewal disclosure, and cost of credit disclosure. Any reference to the brokerages automatically applies to mortgage brokers and mortgage associates employed by the brokerage. “Private investor” means any person who invests or proposes to invest in a mortgage, but does not include:

a.    a body corporate that:

  • has assets having an aggregate realizable value, net of related liabilities, of at least $5 million; and
  • provides written confirmation to the mortgage brokerage or mortgage administrator that it has assets in the amount mentioned in paragraph above.

b.    an administrator or trustee of a registered pension plan within the meaning of subsection 248(1) of the Income Tax Act (Canada)

c.    a mortgage brokerage or a mortgage administrator acting on its own behalf

d.    the Crown, or an agent of the Crown, in right of New Brunswick, of Canada, or of any other jurisdiction in Canada

e.    a person, in respect of which all of the owners of interests, other than the voting securities required by law to be owned by directors, are persons or entities described in paragraph a to d.

Best interests requirement

If a mortgage brokerage solicits a private investor to make an investment in a mortgage, negotiates or arranges an investment in a mortgage by the private investor, or provides advice to a private investor with respect to the appropriateness of making a particular investment in a mortgage, the brokerage is required to act in the best interests of a private investor and must ensure that the borrower is represented by another mortgage brokerage.

Timing of disclosure

Every required disclosure of information to a private investor must be made at the earliest opportunity and, in any case, no later than two business days before the earliest of the following events:

  • the mortgage brokerage receives money from the private investor
  • the mortgage brokerage enters into an agreement to receive money from the private investor
  • the private investor enters into an agreement to invest in a mortgage
  • the money is advanced to the borrower under the mortgage
  • the closing date for the mortgage transaction

If the private investor consents in writing to receiving the disclosure after the deadline described above, the disclosure may instead be made no later than one business day before the earliest of the events described above.

Maintenance of records

A brokerage must keep on file written evidence that every private investor was provided a completed investor disclosure document and must retain all books, records, and documents for a minimum period of seven years after the date of the transaction to which the books, records, or documents relate.

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.

Mortgage investment suitability

A brokerage must take reasonable steps to ensure that an investment in a mortgage that it presents for the consideration of a private investor is suitable, taking into consideration the unique needs and circumstances of the private investor.

Investor disclosure

Every mortgage brokerage must provide each private investor with an investor disclosure document containing the following information:

  • a written statement indicating the steps that the mortgage brokerage took to confirm the identity of the borrower and whether or not the mortgage brokerage was able to obtain that confirmation
  • a written statement indicating the material risks of the investment in a mortgage that the mortgage brokerage presents for the consideration of a private investor
  • a written statement indicating whether the mortgage brokerage or any related person has or may have an interest in the mortgage transaction and, if so, the nature of that interest
  • if an appraisal of the property has been done in the preceding 12 months and is available to the mortgage brokerage, a copy of the appraisal
  • if an appraisal of the property is not available, documentary evidence of the value of the property, other than an agreement of purchase and sale
  • if an agreement of purchase and sale with respect to the property has been entered into in the preceding 12 months and is available to the mortgage brokerage, a copy of the agreement of purchase and sale
  • documentary evidence of the borrower’s ability to meet the mortgage payments
  • a copy of the application for the mortgage and of any document submitted in support of the application
  • documentary evidence of any down payment made by the borrower for the purchase of the property
  • a copy of any agreement that the private investor may be asked to enter into with the mortgage brokerage
  • if the investment is in an existing mortgage, a copy of the mortgage instrument

A mortgage brokerage must obtain the private investor’s written acknowledgement that the mortgage brokerage has disclosed the information and required documents.

Renewal disclosure requirements

Every mortgage brokerage acting on behalf of a private investor with respect to a renewal of an investment in a mortgage must provide the private investor with an investor renewal disclosure document containing the following information:

  • a written statement indicating the material risks of the investment in a mortgage that the mortgage brokerage presents for the consideration of a private investor
  • a written statement indicating whether the mortgage brokerage or any related person has or may have an interest in the mortgage transaction and, if so, the nature of that interest
  • if an appraisal of the property has been done in the preceding 12 months and is available to the mortgage brokerage, a copy of the appraisal
  • if an appraisal of the property is not available, documentary evidence of the value of the property, other than an agreement of purchase and sale
  • if an agreement of purchase and sale with respect to the property has been entered into in the preceding 12 months and is available to the mortgage brokerage, a copy of the agreement of purchase and sale
  • a copy of the application for the mortgage renewal and of any document submitted in support of the application
  • a copy of any agreement that the private investor may be asked to enter into with the mortgage brokerage
  • a certificate of insurance or other documentary evidence confirming the insurance coverage with respect to the property

A mortgage brokerage must obtain the private investor’s written acknowledgement that the mortgage brokerage has disclosed the information and required documents.

Other information

A private investor must also be provided any other information, in writing, that an investor of ordinary prudence would consider to be material to a decision about whether to make the investment in the mortgage.

Cost of credit disclosure

A brokerage representing a private investor is responsible for carrying out the disclosure obligations to the borrower that would ordinarily fall upon the lender.

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 brokerage representing the private investor’s duty to give a disclosure statement to the borrower. The brokerage representing the private investor has the option of adopting the disclosure statement provided to the borrower as its own or providing its own disclosure statement.

In a private investment transaction, it is the brokerage’s responsibility to disclose the brokerage fee and account for it in the APR calculation where the fee is deducted from the amount advanced to the borrower and is paid directly to the borrower’s brokerage.

A brokerage who 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 borrower’s 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