This will ultimately strengthen consumers' trust in the mortgage sector
For the Financial Services Regulatory Authority of Ontario (FSRA), a major element of the regulator’s 2024 work will be ensuring the suitability of mortgages being provided to consumers.
“Mortgage suitability is the foundation of why a home buyer would want to work with a mortgage broker, which is to help them find the right mortgage that is suitable to the needs and circumstances,” Antoinette Leung, head of financial institutions and mortgage broker conduct, said during a recent edition of Canadian Mortgage Professional’s CMP Talk.
“When it is done well, it can really strengthen a consumer’s trust in this sector. As a consumer protection agency, we are obviously very interested in this.”
Leung highlighted persistent market volatility as a primary reason for why FSRA is sharpening its focus on mortgage suitability.
“We all know that interest rates have risen substantially last year, and then there is inflation, there is uncertainty in the housing market,” Leung said. It is more difficult for many consumers to qualify for mortgages, and some of them may need to look at alternative solutions.”
Antoinette Leung, Head of Mortgage Brokerage Conduct at FSRA says the goal is to ensure that when a consumer is working with a mortgage broker, they receive a mortgage suitable for their needs.https://t.co/FXjgy8RRUO#mortgageindustry #mortgagebroker #specializedlending
— Canadian Mortgage Professional Magazine (@CMPmagazine) October 4, 2023
Another reason for the focus on mortgage suitability arose from FSRA’s own oversight of the market.
“In the past few years, we’ve noticed that many of the mortgage transactions that we looked at in our examinations – in fact, over 60% – do not have documented reasons why a mortgage that has been recommended to a client is suitable,” Leung said.
This gap has serious implications on what can be done to ensure a smooth and reliable transaction for every party involved.
“It’s really not possible for us as regulators, as well as for the principal broker, to understand why a recommendation was made – and if after the fact, the clients have questions or complaints, there are very little documents to go back on to prove why an individual agent or broker made that recommendation,” Leung said.
At the same time, Leung said that private non-institutional mortgages are not in and of themselves reason for alarm on FSRA’s part.
“[These mortgages] allow many consumers to buy homes for themselves and for their families,” Leung said. “With reduced mortgage affordability, less consumers will qualify for traditional mortgages, so private mortgages do play a very important role in this environment.
“What we are concerned about is really the lack of understanding. Many private mortgages [are] less standardized, and [come with] more fees and restrictions… What we’re concerned about is that consumers don’t understand the features and implications when they are being recommended these mortgages.”
Listen now: FSRA talks suitability focus in 2024
