Client Update: Mortgage Regulation Act – the new regime
Brian Tabor, QC and Simon McCormick
In May 2012, the Nova Scotia Legislature passed the Mortgage Regulation Act (“MRA”). The MRA has not yet come into force, but, when it does, it will replace the Mortgage Brokers’ and Lenders’ Registration Act and, in conjunction with the regulations that will be passed pursuant to the MRA (the “MRA Regulations”), will establish a new regulatory regime for mortgage brokerages, mortgage brokers, associate mortgage brokers, mortgage lenders and mortgage administrators.
The MRA is expected to come into force before the end of 2018. A draft of the proposed MRA Regulations (the “MRA Draft Regulations”) was released in September 2017. This Client Update is based on the MRA and MRA Draft Regulations, which are subject to change pending promulgation.
General Features of the MRA and the MRA Draft Regulations
Licensing
Subject to certain exceptions, mortgage brokerages, mortgage brokers, associate mortgage brokers, mortgage lenders, and mortgage administrators will need to be licensed in order to conduct business in Nova Scotia (MRA, s. 12(2)). Under the MRA, there will be different classes of licences for mortgage brokerages, mortgage brokers, associate mortgage brokers, mortgage lenders, and mortgage administrators (MRA, s. 12(1)), and different rules will apply to licensees who hold different classes of licences.
Applicants will need to satisfy the criteria and meet the requirements outlined in the MRA and the MRA Regulations. The proposed Lender, Brokerage, Broker and Administrator Licensing Regulations (the “Licensing Regulations”), which are included in the MRA Draft Regulations, outline the criteria that prospective licensees or licensees will likely be required to satisfy in order to acquire or renew a particular class of licence.
Licences issued pursuant to the MRA will likely need to be renewed annually. The Licensing Regulations provide that licenses will expire on October 31 in the calendar year following the year in which the licenses were acquired or renewed (Licensing Regulations, s. 8).
Exemptions
The MRA will not apply to persons or classes of persons who are exempted from its application by the MRA Regulations (MRA, s. 3(11)).
The proposed Mortgage Regulation Act Exemption Regulations (the “Exemption Regulations”), which are part of the MRA Draft Regulations, list the persons and classes of persons who will likely be exempted from the application of the MRA. These persons and entities include:
- banks and authorized foreign banks (s. 3(a));
- trust and loan companies (s. 3(b));
- cooperative credit associations (s. 3(c));
- insurance companies (s. 3(d));
- provided that certain conditions are met, persons who refer prospective borrowers to mortgage professionals and vice versa (ss. 3(g)-(h), 4); and
- persons who undertake mortgage brokering or mortgage lending activities with respect to mortgages that are each worth more than $1,000,000, provided that:
• the Cost of Borrowing Regulations do not apply to the mortgages;
and
• the investors in the mortgages are not private investors or, if one or
more of the investors in the mortgages are private investors,
licensees or exempted persons broker the mortgages on their behalf
(s. 3(f)).
The Exemption Regulations also suggest that there will be a number of partial exemptions. In certain circumstances, for instance, lawyers, trustees in bankruptcy, and other persons will likely be able to act as mortgage brokers or mortgage administrators without being licensed (Exemption Regulations, s. 5). Individuals or entities will also likely be able to act as mortgage lenders without being licensed provided that they lend their own money and that, in any 12 month period, they undertake mortgage lending activities with respect to four or fewer mortgages that are cumulatively worth less than $1,000,000 (Exemption Regulations, s. 6(a)). Finally, credit unions will likely be able to act as mortgage lenders without being licensed (Exemption Regulations, s. 6(b)). However, as these are partial exemptions, many of the provisions of the MRA and the MRA Regulations will still apply to persons who are partially exempted from the application of the MRA and the MRA Regulations.Disclosure, reporting, record-keeping and standards of conduct
When the MRA comes into force, people and entities that employ mortgage brokers, broker mortgages, provide mortgage loans, or administer mortgages will be required to comply with numerous disclosure, reporting, and record-keeping requirements. While some of these requirements are included in the MRA, many of them are outlined in the MRA Draft Regulations, namely the:
- General Disclosure Regulations;
- Cost of Borrowing Disclosure Regulations;
- Reporting Requirements Regulations; and
- Record-keeping Requirements Regulations.
In addition, licensees will be required to comply with prescribed standards of conduct. The MRA Draft Regulations include standards of conduct for each class of licensee.
Penalties
After the MRA comes into force, it will be an offence for a person to fail to comply with the MRA, the MRA Regulations, or an order given by the Registrar (MRA, s. 69(1)). Administrative penalties may be imposed by the Registrar in lieu of charging someone with a summary conviction offence (MRA, s. 72(2)).
An individual who is found guilty of a summary conviction offence under the MRA may be ordered to pay a fine of up to $500,000, be imprisoned for up to one year, or be both fined and imprisoned (MRA, s. 69(3)(a)). A corporation that is found guilty of an offence under the MRA may be ordered to pay a fine of up to $1,000,000 (MRA, s. 69(3)(b)). Finally, directors and officers of a corporation may be convicted of an offence if the corporation has violated the MRA or the MRA Regulations (MRA, s. 69(4)).
Archive
Jennifer Taylor Introduction Appeal courts in Ontario1 and Nova Scotia2 have now issued decisions about Trinity Western University’s proposed law school (“TWU”) in British Columbia, and at first glance they couldn’t be more different. The Court of Appeal for…
Read MoreJoe Thorne1 and Giles Ayers2 Limitation periods serve a critical function in the civil justice system. They promote the timely resolution of litigation on the basis of reliable evidence, and permit litigants to assess their legal exposure…
Read MoreOn July 14, 2016 the Supreme Court of Canada issued a significant decision affecting federally regulated employers across Canada. In Wilson v. Atomic Energy of Canada Limited the Court held that the purpose of the unjust dismissal…
Read MoreOn April 1, 2016 New Brunswick’s Mortgage Brokers Act came into force, requiring businesses acting as mortgage brokerages or as mortgage administrators in New Brunswick to be licensed. A mortgage brokerage is a business that on behalf…
Read MoreIn May 2016, the Federal Court of Canada confirmed that copyright does not protect facts, even where a book’s author is clearly inspired by the content of a film (Maltz v. Witterick, 2016 FC 524 (CanLII)).…
Read MoreBy Jennifer Taylor “…firms of notaries or lawyers…must not be turned into archives for the tax authorities”1 So says the Supreme Court of Canada in one of two highly anticipated decisions on solicitor-client privilege, offering lawyers…
Read MoreJoe Thorne1 and Clara Linegar2 As joint owners of a business, what do you do when the business relationship falls apart? And what if one owner undermines the business in the process? In Smith v Hillier,3 Justice Paquette…
Read MoreThe Supreme Court of Canada has dismissed the appeals in Bruce Brine v. Industrial Alliance Insurance and Financial Services Inc.1 (with costs) and Luciano Branco, et al. v. Zurich Life Insurance Company Limited, et al.(without costs). Both of…
Read MoreOn May 4, 2016, the Nova Scotia Pooled Registered Pension Plans Act (“PRPP Act”) was proclaimed in force, and finalized Pooled Registered Pension Plan Regulations were released. While there were no major changes from the previously released draft regulations, the proposed rules…
Read MoreBy Level Chan and Dante Manna Pooled Registered Pension Plans (“PRPPs”) are closer to becoming a reality for Nova Scotian employers. PRPPs were established by the Federal government in an effort to address the lack of retirement savings…
Read More