ARTICLE
23 January 2025

The Times They Are A-Changing: The BC Mortgage Services Act And The Regulation Of Mortgage Services

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MLT Aikins LLP

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MLT Aikins LLP is a full-service law firm of more than 300 lawyers with a deep commitment to Western Canada and an understanding of this market’s unique legal and business landscapes.
The new Mortgage Services Act will introduce a new disciplinary framework and updated licensing and regulatory requirements for those engaged in mortgage lending.
Canada Finance and Banking

The new Mortgage Services Act will introduce a new disciplinary framework and updated licensing and regulatory requirements for those engaged in mortgage lending. Timelines for the implementation of the Mortgage Services Act are still to be determined.

Introduction

In 2022, the Legislative Assembly of British Columbia passed Bill 29 – 2022: Mortgage Services Act, which will repeal the current Mortgage Brokers Act ("MBA") and replace it with the new Mortgage Services Act ("MSA"). The MSA was introduced in response to recommendations by the Cullen Commission of Inquiry into Money Laundering in British Columbia ("Commission") to protect consumers and combat money laundering in the province.

With the introduction of the MSA, the B.C. government has adopted a new and comprehensive approach to the regulation of mortgage services providers that includes new licensing requirements and increased disciplinary penalties. Lenders and others who operate within the mortgage services industry should be aware of the new regulatory framework and take ongoing steps to ensure compliance as these developments are still in progress and subject to further changes.

Current regulations: the Mortgage Brokers Act

Enacted in 1972, the MBA was originally created for the purpose of holding registered mortgage brokers to specific regulatory and educational standards. The MBA defines "mortgage broker" as any person who does any of the following:

  • Carries on a business of lending money secured in whole or in part by mortgages, whether the money is the mortgage broker's own or that of another person.
  • Holds himself or herself out as, or by an advertisement, notice or sign indicates that he or she is, a mortgage broker.
  • Carries on a business of buying and selling mortgages or agreements for sale.
  • Receives, in any one year, an amount of $1,000 or more in fees or other consideration, excluding legal fees for arranging mortgages for other persons.
  • Lends money, during any one year, on the security of 10 or more mortgages.
  • Carries on a business of collecting money secured by mortgages.

While not yet repealed, the MBA serves as the current framework governing those looking to become a mortgage broker, as well as existing mortgage brokers who are seeking to renew, transfer, or reinstate their registration. In order to register as a mortgage broker, the applicant must be a company registered with BC Registries and Online Services and appoint a designated individual who will be accountable for and speak on behalf of the company. If the applicant is an individual operating as a sole proprietorship, the MBA requires them to complete certain educational courses and examinations before registration, depending on their knowledge and experience in the mortgage services industry.

The MBA also sets out certain offences with corresponding penalties, and mortgage brokers must be aware of their regulatory obligations to maintain registration and operate lawfully. The maximum penalty imposed under the MBA is a fine of $200,000 or imprisonment for not more than two years, or both. All mortgage brokers must comply with the MBA and the corresponding Regulations to avoid being subject to penalties. Existing mortgage brokers who already carry a licence under the MBA should be aware that their current licence and registration will no longer be sufficient once the MSA comes into effect. Everyone who provide mortgage services will be required to obtain a license under the MSA's new licensing regime.

The new Mortgage Services Act

The new regulations under the MSA depart significantly from what is currently in place under the MBA. While the MBA has been in force for over 50 years, it has not kept pace with recent developments in the mortgage and financial services industries and was a main source of criticism from the Commission. The MSA was enacted largely in response to the Commission's recommendations and grants wide regulatory powers to the BC Financial Services Authority ("BCFSA"), allowing it to create and impose licensing rules, compliance requirements, and new disciplinary penalties.

Pursuant to the MSA, the BCFSA will facilitate complete oversight of the mortgage services industry and expand the scope of service providers covered under its new regulatory scheme. This increased scope of regulation under the BCFSA includes the creation of a new category of "mortgage services" to replace the MBA's definition of "mortgage broker." This category distinguishes between mortgage lenders, brokerage firms, and individual brokers. Pursuant to the MSA, "mortgage services" includes the acts of:

  • Dealing in mortgages
  • Trading in mortgages
  • Mortgage lending
  • Administering mortgages

In addition to the above, the BCFSA will also have the ability to:

  • Regulate licences.
  • Establish requirements, conditions, and restrictions on licences.
  • Implement standards of conduct and business practice standards for licensees.
  • Provide standard terms to be included in proposed contracts or forms prepared by licensees.
  • Make different rules applicable to different levels of licences, categories of licences, and classes of mortgages.

Disciplinary penalties

Licensees should be cautious in navigating the MSA's new regime, as new penalties have been introduced to penalize non-compliant mortgage service providers. The MSA provides a comprehensive list of offences that can be committed under the MSA or any of the Rules soon to be enacted by the BCFSA. The BCFSA will also have the power to conduct investigations, hold disciplinary hearings, and administer penalties. These changes depart from the current disciplinary framework under the MBA.

The fines for contravening the MSA will be significantly higher than those currently imposed under the MBA, starting with new administrative penalties of up to $100,000. Disciplinary penalties will be increased from $50,000 to a maximum of $500,000 and individuals or corporations with more than one conviction could face penalties of up to $2.5 million.

Licensing requirements and exemptions

The MSA introduces new licensing requirements for anyone who wishes to provide mortgage services. Under the MSA, mortgage service providers are required to obtain a valid licence depending on which category they fall under, with the following licence classes established:

  • Mortgage brokerage licence
  • Principal broker licence
  • Mortgage broker licence
  • Mortgage lender licence

In applying for a licence, applicants must satisfy the Superintendent of Mortgage Services (who will be appointed by the BCFSA) that they meet the qualification requirements established by the rules enacted by the BCFSA ("Rules"). The Rules are still under development by the BCFSA; however, they may address aspects such as the education, experience, or qualifications for an applicant to obtain or renew a licence; capital and liquidity requirements that must be maintained for the duration of the licence; and business practice standards that licensees must adhere to.

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Under the MSA, all persons who engage in the provision of mortgage services must carry a licence, subject to the following exemptions:

  • Insurance companies.
  • Savings institutions.
  • A director, officer, or employee of an insurance company or savings institution in respect of mortgage service provided on behalf of that insurance company or savings institution.
  • Any person acting for the government of Canada or the government of a province or for an agency of any of those governments, in respect of mortgage services provided on behalf of that government or agency.
  • A lawyer in respect of mortgage services that are incidental to legal services provided by the lawyer.
  • A person acting under the authority of a court.
  • A trustee in bankruptcy, custodian, receiver, receiver manager, or liquidator who is appointed under a federal or provincial enactment, in respect of mortgage services provided by the person in that capacity.
  • An executor or administrator of an estate, in respect of mortgage services provided by the person to the estate in the person's capacity as executor or administrator.
  • A trustee, in respect of mortgage services provided under the terms of a will or marriage settlement.

The BCFSA will communicate details regarding expected timelines, licensing requirements, and the Rules to the mortgage services industry in due course; however, at the time of writing, these details remain unknown. Those currently engaged in mortgage lending should be aware of the pending regulatory changes that will come into force with the implementation of the MSA and are urged to take steps to ensure preparedness for a smooth transition. We are monitoring these developments closely and anticipate that further information will be made available later in 2025.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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