FSCO releases new forms for brokerages dealing with non-qualified syndicated mortgages
On July 1, 2018, new regulations came into force in Ontario for syndicated mortgages. FSCO will now consider syndicated mortgages to be either “qualified” or “non-qualified”. A detailed explanation can be found in the FSCO bulletin here.
Simply put, a “qualified” syndicated mortgage must meet all of the following criteria:
- It must be arranged through a mortgage brokerage
- It must secure a debt obligation on a (primarily) residential property that has no more than 4 units in total, with no more than one unit used commercially.
- The maximum loan to value total of all mortgages on the property cannot exceed 90% of its current value. The future anticipated value of the property cannot be used when considering this LTV maximum. It cannot be a development or construction mortgage.
- The mortgage must secure one debt obligation that is the same term length as the mortgage, and the rate of interest must match the interest rate of the debt obligation.
Any syndicated mortgage that does not meet all of the above criteria is now considered “non-qualifying”. These new regulations create obligations on brokerages arranging for non-qualifying syndicated mortgages.
Brokers and their clients must now complete three new forms when arranging non-qualifying syndicated mortgages. Additionally, there is a new $60,000 annual investment limit in non-qualifying syndicated mortgages for investors not part of a designated class as defined by O. Reg. 188/08 s. 2(1). New procedures are required to be implemented by the mortgage brokerage describing how the brokerage will manage consumer complaints related to non-qualifying syndicated mortgages. Any complaint received by the brokerage must be reported to FSCO within 10 days. The ability for the investor/lender to waive their 2 day cooling off period has also been removed.
If your brokerage only arranges the simpler “qualified” syndicated mortgages, these requirements may not apply to you. However, if your brokerage does arrange some non-qualifying syndicated mortgages, the brokerage needs to implement these new processes to meet its regulatory obligations.
If you are unsure of how your brokerage’s business will be impacted please feel free to reach out to Samuel Duncan, Senior Manager of Government and Policy firstname.lastname@example.org or contact FSCO directly to seek specific guidance and direction.