Quebec brokers – what regulatory challenges are they facing?

The province's mortgage professionals have had to contend with a longer checklist in recent times

Quebec brokers – what regulatory challenges are they facing?

Throughout the COVID-19 pandemic, mortgage professionals across Canada have faced a host of new and ever-evolving challenges that have thrown up some significant hurdles over the past two years.

As activity in the mortgage market began to surge a few weeks into the pandemic, agents, brokers, and lenders alike were forced to grapple with the realities of remote working and dealing with clients and colleagues virtually instead of in person.

That frenetic market pace meant volume also skyrocketed, leading to even longer working hours than usual and a relentless work schedule that persisted even when the market began to cool somewhat last summer.

To cap it all off, tighter lending restrictions and a rapidly changing economic landscape were made even more complex by the introduction of an elevated qualifying rate for both insured and uninsured mortgages by the federal finance minister and the Office of the Superintendent of Financial Institutions (OSFI) last June.

Brokers based in Quebec, meanwhile, have also had to deal with another significant change over the past two years: the transfer of mortgage brokerage sector supervision from the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ) to l’Autorité des marches financiers (AMF), which regulates and oversees that province’s financial sector.

The move – which took place in May 2020 – saw mortgage brokering come under the regulation of the Act respecting the distribution of financial products and services (ARDFPS), requiring brokers to hold a certificate issued by the AMF.

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A wide-ranging set of new rules were added to that Act to take mortgage brokering into account, including regulations respecting the compulsory professional development of mortgage brokers and concerning the information required to be provided to consumers.

The AMF also stipulated that brokers must clearly carry out all the acts in its definition of a mortgage brokerage transaction, which it said consisted of clear steps.

Brokers are required to explain what they are agreeing to do for their clients, articulate the method by which they are remunerated for their work, and “know their clients” – meaning that they must ultimately make a proposal that their customers can clearly understand in order to make an informed decision.

That includes ensuring that the client can understand the characteristics of the proposed loan, anticipate associated costs, and understand applicable penalties if the terms of the loan aren’t followed.

One of the consequences of widespread regulatory reform in Quebec in recent years has been a longer list of boxes for mortgage brokers to tick in their dealings with clients, according to a prominent mortgage professional based in the province.

Ryan La Haye (pictured top), president at Groupe RLH in Laval, told Canadian Mortgage Professional that new requirements for brokers, while lengthening the mortgage process, were ultimately put in place to safeguard and protect the interests of the public.

“Noting your file has to be much more detailed,” he said. “In the past when I started, you used to have a 30-minute conversation with the client to determine what [they] were looking for, talk about the market, say ‘I think this would be good for you, do you agree?’, submit the deal, get the documents and you’re good to go.”

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Now, a host of steps need to be carried out, La Haye said, including determining material risk, noting it in the client’s file, determining needs in writing, having that document signed, preparing a written recommendation with multiple options and justifications to also be signed off on by the client.

“Every conversation, every email has to be categorized and attached to the file,” he said. “You’re subject to licence suspensions and fines if you don’t.”

Only when the client has signed off on recommendations can the broker submit to the lender, with the due diligence carried out afterwards. “All the way up to the notary, everything has to be detailed [and] noted,” La Haye said.

While La Haye applauded the fact that those new rules had been introduced to safeguard the public, he said that it was necessary to strike a fine balance so as not to put mortgage brokers at an excessive or unfair disadvantage compared with the banks.

“It’s great for the protection of the public, but when the protection of the public is so intense that it removes competition… there are fewer options for the client, and fewer options are just bad,” he said.