Mortgage Brokers Regulation

Mortgage Brokers Regulation, M.R. 41/2011 The Mortgage Brokers Act , C.C.S.M. c. M210 Regulation 41/2011 Registered April 26, 2011 bilingual version (HTML) Table of Contents Section 1 Definitions and interpretation REGISTRATION 2 Categories of registration 3 Exemptions from registration 4 Fees FINANCIAL RESPONSIBILITY 5 Surety bond requirements 6 Forfeiture of surety bond 7 Errors and omissions insurance 8 Minimum capital requirements TRUST ACCOUNTS AND AGREEMENTS 9 Location of trust account 10 Deposit to trust account 11 Receipt for trust money 12 Payments from trust account 13 No service charge 14 Trust account balance 15 Interest on trust account balance 16 Trust agreement BOOKS AND RECORDS 17 Books of account 18 Duplicate records 19 Record of withdrawal from trust account 20 Mortgage broker to keep records 21 Records to be updated monthly 22 How trust records must be kept 23 Financial statements 24 Trust compliance report 25 Exemptions from financial reporting requirements DISCLOSURE 26 Disclosure to borrowers and lenders OTHER MATTERS 27 Report after transaction 28 Trust agreement 29 Service of documents 30 Failure to comply 31 Repeal 32 Coming into force Schedule Forms Definitions and interpretation 1(1) The following definitions apply in this regulation. "Act" means The Mortgage Brokers Act . («  Loi  ») "bank" means a bank as defined in subsection 22(3) of the Act. (« banque ») "branch" means an office of a bank. (« succursale ») "exempt entity" means an entity that is exempt under clause 3(1)⁠(a), (b), (c), (d) or (e) of the Act from the requirement to be registered as a mortgage broker. (« entité exemptée ») "restricted mortgage broker" means a person who is a mortgage broker by reason only of the fact that the person, otherwise than as an employee of a mortgage broker, (a) solicits another person to lend or borrow money on the security of a mortgage; (b) provides information about a prospective borrower to a mortgage lender; (c) assesses a prospective borrower on behalf of a mortgage lender; (d) arranges or places a mortgage for another person; or (e) arranges or solicits the purchase or sale of a mortgage for another person; but does not receive or have any control or direction over money advanced or paid under loans secured by mortgages or paid on the purchase of a mortgage. (« courtier d'hypothèques à statut restreint ») "trust account" means, except in section 5, the trust account to be maintained by a mortgage broker under section 22 of the Act. (« compte en fiducie ») "trust money" means all money received by a mortgage broker under section 21 of the Act. (« fonds en fiducie ») 1(2) For the purposes of the Act and this regulation, a reference to a registered mortgage broker or to an applicant for registration as a mortgage broker (a) includes a person registered, or applying for registration, as a restricted mortgage broker, except as expressly provided otherwise; and (b) does not include an individual registered or applying for registration as a salesperson or authorized official of a registered mortgage broker. REGISTRATION Categories of registration 2(1) Subsection 2(1) of the Act requires any person acting as a mortgage broker, authorized official or salesperson to be registered as a mortgage broker, authorized official or salesperson. For this purpose, (a) a corporation or sole proprietor acting as a mortgage broker (i) may be registered as a restricted mortgage broker if the activities of the corporation or proprietor are limited to those of a restricted mortgage broker, and (ii) in any other case, must be registered as a mortgage broker; and (b) an individual engaged or employed by a registered mortgage broker — and a partner of a registered mortgage broker — who is registered and acting as a salesperson or authorized official of the broker is not required to be registered as a mortgage broker. 2(2) Unless exempted from registration by the Act, this regulation or an order of the commission, every person, other than an individual registered and acting as a salesperson or authorized official of a registered mortgage broker, who carries on any of the activities of a mortgage broker in Manitoba must be registered as a mortgage broker. If the person's activities are limited to those of a restricted mortage broker, the person may be registered as restricted mortgage broker. Exemptions from registration 3 Subsection 3(1) of the Act exempts certain classes of persons from the requirement in subsection 2(1) of the Act to be registered as a mortgage broker, authorized official or mortgage salesperson. The following persons or classes of persons are also exempt from that registration requirement: (a) a person who is registered under The Real Estate Brokers Act as a broker, or as an authorized official of, or salesman for, a registered broker under that Act and whose activities as a mortgage broker are limited to (i) lending the broker's own money on the security of a mortgage, and (ii) obtaining a mortgage loan for a borrower or finding a mortgage loan for a lender (including the sale of an existing mortgage loan from one lender to another) in circumstances where (A) there is only one lender or, if there is more than one lender, each of them is a registered mortgage broker or an exempt entity, (B) the broker does not receive or have any control or direction over any proceeds of the loan, (C) if the broker is to receive any remuneration from the borrower for finding the lender, the broker gives to the borrower, at least one clear day before the date on which the borrower signs the mortgage, a written statement setting out the amount of the remuneration to be paid by the borrower and confirming that no remuneration is to be paid to the broker by the lender, and (D) if the broker is acting as mortgage agent for the purchase or sale of an existing mortgage, the broker discloses to both the seller and purchaser the broker's true relationship to them and provides to the broker's principal, before the sale, transfer or assignment of the mortgage, a written statement setting out the amount of the remuneration to be paid to the broker by the broker's principal; (b) a person whose only activity as a mortgage broker is to refer a potential customer to a mortgage broker, unless (i) the person  receives or expects to receive remuneration from the lender or the borrower, (ii) the person receives or has any control or direction over any of the proceeds of the mortgage loan, or (iii) there is more than one lender, and at least one of the lenders is not a registered mortgage broker and is not an exempt entity; (c) La Federation des Caisses Populaires du Manitoba Inc. Fees 4 The following fees are payable by registrants and applicants for registration: 1. For registration as a mortgage broker: (a) new registration or reinstatement of registration FINANCIAL RESPONSIBILITY Surety bond requirements 5(1) Subsection 11(1) of the Act requires an applicant for registration as a mortgage broker to file a surety bond with the registrar, and subsection 12(1) of the Act prohibits the registration of a person as a mortgage broker if the person has not filed the required surety bond. This section prescribes the surety bond requirements and exempts restricted mortgage brokers from those requirements. 5(2) An applicant for registration as a restricted mortgage broker is not required to file a surety bond with the registrar, and a person may be registered as a restricted mortgage broker without having filed a surety bond. 5(3) The surety bond to be filed with the registrar must be issued (a) in the amount specified by the commission or, if the commission has not specified an amount, in the amount of $100,000; (b) by an assurance or bonding company authorized to carry on business in Manitoba; and (c) in the form of surety bond set out in the Schedule (Form 1). 5(4) A surety bond remains in full force and effect until it is terminated in accordance with the terms of the bond and of the Act, even if the bonded person's registration as a mortgage broker expires or is suspended or cancelled. 5(5) The principal and surety under a surety bond filed with the registrar remains liable for the amount of the bond, even if that amount is greater or less than $100,000. Forfeiture of surety bond 6(1) The registrar must promptly notify the surety under a surety bond, in writing, when the bond is forfeited under subsection 38(1) or (2) of the Act. 6(2) If the commission does not require the proceeds of the bond to be paid in full at the time of the forfeiture, the registrar may, as directed by the commission, (a) in the notice of forfeiture, specify the amount that the commission requires to be paid immediately; and (b) from time to time within two years after the date of forfeiture, by written notice, direct the surety to pay all or any part of the unpaid balance of the bond. 6(3) Upon receipt of the notice of forfeiture under subsection (1) or of a subsequent notice under clause (2)⁠(b), the surety must promptly pay to the commission, or as directed by the commission in an order assigning all or any part of the proceeds of the bond, (a) the amount of the bond; or (b) if subsection (2) applies to the notice, the amount specified in the notice. 6(4) When the commission receives proceeds of a forfeited bond, the commission (a) must cause the proceeds to be deposited in a special trust account in the name of the commission; and (b) may, by order, direct all or any part of the proceeds to be paid or applied in accordance with subsection 38(3) of the Act. 6(5) When proceeds of a forfeiture are paid to a person (a) pursuant to an order referred to in clause (4)⁠(b); or (b) pursuant to an order of the commission assigning the proceeds to the person; the person must apply the proceeds toward settlement of his or her claim against the person whose conduct resulted in the forfeiture of the bond. 6(6) If proceeds of a forfeited bond remain in the special trust account referred to in clause (4)⁠(a) on the second anniversary of the date of forfeiture, the commission may, by order, direct the proceeds to be paid to one or more of the following: (a) the surety named in the forfeited bond; (b) the Minister of Finance, for deposit in the Consolidated Fund; (c) any person considered by the commission to be entitled to the proceeds. Errors and omissions insurance 7 Every applicant for registration as a mortgage broker must have, and every registered mortgage broker must maintain, errors and omissions insurance that (a) is in a form approved by the registrar; (b) includes extended coverage for fraudulent acts; (c) is sufficient to pay a minimum of (i) $500,000 with respect to any one occurrence involving the broker, and (ii) $1,000,000 with respect to all occurrences during a 365-day period involving the broker. Minimum capital requirement 8(1) In this section, "capital" means the amount by which (a) the broker's capital, retained earnings (deficit) and subordinated long-term debt acceptable to the commission; exceeds (b) the broker's contingent liabilities and intangible assets. 8(2) For the purpose of subsection 13(1) of the Act (minimum capital requirements), the minimum capital to be maintained by a registered mortgage broker is $100,000. 8(3) Section 13 of the Act does not apply to a person registered as a restricted mortgage broker. TRUST ACCOUNTS AND AGREEMENTS Location of trust account 9(1) A mortgage broker's trust account must be maintained at a branch located in Manitoba. 9(2) Despite subsection (1), the registrar may permit a trust account to be maintained at a branch outside Manitoba if the registrar is satisfied that doing so would not be contrary to the public interest. 9(3) At the time of applying for registration, a mortgage broker (other than a restricted mortgage broker) must notify the registrar in writing of the name of the bank and address of the branch where the broker's trust account is to be maintained. 9(4) A registered mortgage broker must (a) before moving the trust account to a different branch of the same bank, notify the registrar in writing of the proposed move and the address of that branch; and (b) before opening a new trust account, notify the registrar in writing of the name of the bank and address of the branch where the new account will be maintained. Deposit to trust account 10(1) A mortgage broker must ensure that all trust money received by the broker, or by any of the broker's authorized officials or salespersons, must be deposited in the broker's trust account not later than the next banking day after the date of receipt. 10(2) Despite subsection (1), if a cheque is presented for certification to the branch on which it is drawn within one banking day after receipt of the cheque, (a) the certified cheque — or the bank draft or money order issued by that branch, in the amount of the cheque, in lieu of certification — must be deposited in the trust account within one banking day after the cheque was certified or the bank draft or money order was issued; or (b) if certification of the cheque is refused upon presentation, the cheque may be treated as having been dishonoured, and need not be deposited into the trust account. Receipt for trust money 11 The receipt required by subsection 22(2) of the Act for trust money or deposits must show (a) the amount received; (b) the date of receipt of the trust money or deposit; and (c) sufficient particulars to identify the mortgage being bought, sold or invested in. Payments from trust account 12(1) Money in a mortgage broker's trust account (a) must not be used to pay the broker's personal or general office expenses; and (b) may be paid or transferred to the broker's general account if the money has become payable to the broker on account of a fee or commission or otherwise. 12(2) Any share of a fee or commission referred to in clause (1)⁠(b) that is payable to any other mortgage broker or to an authorized official or salesperson must be paid out of the broker's general account. No service charge 13 No mortgage broker shall authorize the bank at which the broker's trust account is maintained to deduct any service or other charge from the money in the account. Trust account balance 14(1) A mortgage broker must maintain a sufficient balance in the broker's trust account or trust accounts to satisfy all of the broker's obligations with respect to the trust money. 14(2) A mortgage broker must not make, or authorize the making of, any payment out of the broker's trust account that would create a negative balance in an individual's separate account maintained under subsection 22(2) of the Act. Interest on trust account balance 15(1) Subject to subsection (2), no mortgage broker shall agree to pay interest to any person on money held in the broker's trust account. 15(2) A mortgage broker may, if so directed in writing by all interested parties, (a) assign to an interested party any interest earned on the trust account; or (b) deposit in a non-chequing account, or otherwise invest in an appropriate investment for trustees, any trust money in relation to which the broker has agreed to account for interest received. 15(3) For the purposes of the Act and this regulation, while trust money remains deposited or invested as permitted by clause (2)⁠(b) it is deemed to be held in the broker's trust account. 15(4) Despite subsection (2), a mortgage broker who administers a mortgage must not make any arrangement (a) to pay interest on; or (b) to hold for any longer period than the period specified in the agreement entered into with respect to that mortgage as required by section 25 of the Act; any money or deposit received by the broker with respect to periodic payments made on that mortgage. Trust agreement 16 A trust agreement required by subsection 21(3) of the Act must include (a) particulars of any arrangement to pay interest on the trust money or deposit; (b) a provision for determining the time at which the mortgage broker may withdraw from the broker's trust account any commission, fee, or other remuneration or reimbursement for expenses incurred by the broker; (c) particulars as to whether the deposit will remain in the mortgage broker's trust account until a particular mortgage or transfer or assignment thereof has been registered in an appropriate land titles office or land registry office or whether funds will be transferred to a solicitor; and (d) a provision prohibiting the broker from making a payment or transfer requiring the provision of information under section 23 of the Act unless the person to whom the information is to be given has acknowledged to the broker in writing that he or she has received the information. BOOKS AND RECORDS Books of account 17(1) Every mortgage broker must have and keep up to date (a) in connection with trust money and deposits, trust records and books of account to record (i) all trust money received, (ii) all disbursements of trust money, and (iii) the unexpended balance of trust money held by the broker in total, and also separately for each person for whom that money is held; (b) in connection with trust mortgages and trust assets given, acquired or held in trust, trust records and books of account to record (i) all trust mortgages and trust assets held by the broker and the value of them, and (ii) the broker's trading in trust mortgages and trust assets, reflecting separately for each trust mortgage or trust asset (A) any receipt or disbursement of funds and any liabilities, income and expenses, and (B) the fractional interest or percentage owned by any person who has advanced money for that mortgage or who is entitled to share in its proceeds; and (c) such other books of accounts and records relating to the broker's general assets as are necessary (i) to record the broker's trading in mortgages and sales of mortgages securing loans, or (ii) to prepare the financial statements required by section 30 of the Act. 17(2) To comply with clause (1)⁠(a), a mortgage broker must, at a minimum, keep up to date (a) a book or books (which may be in synoptic form) recording in chronological order the receipt of all trust money and all disbursements made out of trust money; (b) a trust ledger or ledgers recording separately for each person the trust money held on behalf of that person and showing particulars in chronological order of all receipts and disbursements in respect of that person, indicating from where the money was received, to whom it was disbursed, and any unexpended balance; (c) a monthly trust ledger trial balance establishing that the total of the separate trust money balances is in agreement with the separate record of the total money held then in trust; (d) duplicate deposit slips, cancelled cheques and bank statements or passbooks for all trust accounts; and (e) a monthly trust bank reconciliation or reconciliations showing reasons for any differences between bank statements or passbook figures and figures shown as on deposit in trust according to the broker's books of account. 17(3) To comply with clause (1)⁠(b), a mortgage broker must, at a minimum, keep up to date a trust ledger or ledgers in which is recorded, for each trust mortgage or trust asset in chronological order, (a) the amount of money received from each person having an interest in the mortgage, and the date that money was received; (b) the amount of money advanced on the mortgage or the purchase price thereof, as the case may be, and the date that money was advanced or paid; (c) the dates and amounts of any repayments received on the trust mortgages held, the date and amounts of any disbursements of such payments, and the source from which the money was received and to whom it was disbursed; (d) any other liabilities, income and expenses relating to the trust mortgage or trust asset; (e) the receipt or disbursement of any funds whatsoever in connection with the trust mortgage or trust asset; and (f) the outstanding balance of trust mortgages or trust assets in total and also separately for each person for whom that money is held. 17(4) To comply with subclause (1)⁠(c)⁠(i), a mortgage broker must, at a minium, record in its books of account (a) the date of purchase and the amount paid for every mortgage purchased; (b) the dates and amounts of any repayments received on mortgages purchased; and (c) the date of sale and the amount received for every mortgage sold. 17(5) The mortgage broker's books must show the date of each receipt or disbursement required by this section to be recorded in the books. Duplicate records 18(1) If a receipt or disbursement of trust money is required to be recorded in two or more trust ledgers, or in one trust ledger and in the mortgage broker's general accounts or records, the records must be appropriately cross-referenced. 18(2) Duplicate bank deposit receipts for money paid into a mortgage broker's trust account must contain sufficient detail to identify each receipt of trust money recorded in the broker's books with the corresponding deposit of trust money into the broker's trust account. Record of withdrawal from trust account 19(1) Every withdrawal from a mortgage broker's trust account must be made (a) by cheque; or (b) by an electronic transfer of funds that provides a record of the amount withdrawn, the date of the withdrawal and information sufficient to identify the account or person to whom the money was paid. 19(2) Each (a) cheque referred to in clause (1)⁠(a), or the related cheque stub; or (b) record referred to in clause (1)⁠(b); must bear a reference to the transaction or transactions to which it relates, with sufficient detail to permit the cheque or record to be identified with the corresponding disbursement or disbursements recorded in the mortgage broker's trust records and books of account. Mortgage broker to keep records 20 A mortgage broker must maintain complete and accurate records of the following: (a) every mortgage application, mortgage instrument or mortgage renewal agreement received or arranged by the broker; (b) all documents and written information given by the broker to, or obtained by the broker from, a borrower or prospective borrower. Records to be updated monthly 21 The books of account and records of a mortgage broker must be updated at least once a month so that they are always current to within one month. How trust records must be kept 22(1) Unless otherwise authorized in writing by the registrar, a mortgage broker must keep the trust records of the broker's business transacted in Manitoba separate from those that pertain to the broker's business transacted outside Manitoba. 22(2) If the broker keeps in Manitoba any trust money received in connection with business transacted elsewhere, it must be kept separate and apart from trust money received in connection with business transacted in Manitoba, so that the auditor can give the report required by subsection 29(1) of the Act with respect to the broker's business in Manitoba without having to examine accounts and records that pertain to business transacted outside the province. 22(3) Trust records that pertain to business transacted in Manitoba must be accessible from Manitoba for the purposes of the Act and this regulation. M.R. 116/2023 Financial statements 23 The financial statements of a mortgage broker required by section 30 of the Act must be (a) prepared in accordance with generally accepted accounting principles and any applicable provision of the Act or this regulation; (b) audited in accordance with generally accepted auditing standards and any applicable provision of the Act or this regulation; and (c) filed with the registrar within four months after the end of the mortgage broker's financial year. Trust compliance report 24 The trust compliance report of auditors required to be filed under subsection 29(1) of the Act must be prepared in accordance with Form 2 of the Schedule. Exemptions from financial reporting requirements 25 A mortgage broker who files with the commission, in accordance with Form 3 of the Schedule, a statutory declaration signed by an authorized official of the broker confirming that the broker did not handle any trust money during the fiscal year is exempt from the following: (a) the requirement in subsection 29(1) of the Act to file a trust compliance report with the registrar; (b) the requirement in section 30 of the Act to file financial statements with the registrar. DISCLOSURE Disclosure to borrowers and lenders 26(1) Before arranging a mortgage, a registered mortgage broker, including any salesperson or authorized official acting for the registered mortgage broker in arranging the mortgage, must ensure that (a) information described in subsection (2) is disclosed in writing to the borrower; and (b) unless the lender is a registered mortgage broker or an exempt entity, information described in subsection (3) is disclosed in writing to the lender. 26(2) The information disclosed to the borrower must include the following: (a) all amounts that will be payable by the borrower to the broker, salesperson or authorized official, and the manner in which those amounts will be determined; (b) if any fee or other remuneration has been paid or will or may be payable to the broker, salesperson or authorized official in connection with the mortgage, the nature of the fee or other remuneration and the manner in which it will or may be determined; (c) the risks and benefits to the borrower of each mortgage presented by the broker; (d) the nature of the broker's relationship with the lender, including a description of any actual or potential conflict of interest beyond the remuneration arrangements disclosed under clause (b). 26(3) If disclosure to the lender is required under subsection (1), the information to be disclosed must include the following: (a) all amounts that will be payable by the lender to the broker, the salesperson or the authorized official, and the manner in which those amounts will be determined; (b) the risks and benefits to the lender of each mortgage presented by the broker; (c) the nature of the broker's relationship with the borrower, including a description of any actual or potential conflict of interest. 26(4) In this section, "borrower" includes a prospective borrower, and "lender" includes a prospective lender. OTHER MATTERS Report after transaction 27 The information and documents to be provided by a registered mortgage broker to a person under subsection 24(1) of the Act include the following: (a) a copy of a certificate of charge issued by the appropriate land titles or land registry officials with respect to the mortgage; (b) a copy of a solicitor's report with respect to the registration and effect of the mortgage or of the transfer or assignment of an existing mortgage; (c) a statement, in writing, of the total amount invested or advanced on the mortgage and of the fees charged in respect thereof; (d) details, in writing, of the amount and nature of insurance coverage on the property by which the mortgage is secured; (e) a copy of any document that has been delivered to the borrower indicating the cost of the loan. Trust agreement 28 The trust agreement referred to in section 26 of the Act must set out (a) the nature and purpose of the trust; (b) the name and address of the mortgage broker; (c) unless otherwise specifically agreed to by each person referred to in subsection 26(1) of the Act as "any other person", the name of each such person and the percentage of the mortgage owned by him or her; (d) the principal amount of the mortgage owing on the date of the agreement or on a specific date not earlier than 60 days prior to the date of the agreement; (e) the rate of interest chargeable under the terms of the mortgage; (f) the legal description of the mortgaged property; (g) the address of the land titles office or land registry office in which the mortgage is filed or registered, the registration or filing number and other relevant details of the registration or filing of the mortgage; (h) the terms of repayment of the mortgage; (i) a brief description of the underlying security and any ancillary security offered in addition to the mortgage to secure the debt owing under the mortgage; and (j) the name and address of the person acting as a depository for the mortgage documents, if any, and a brief description of the depository or safekeeping agreement, if any. Service of documents 29(1) Any document required or permitted to be given to, or served on, the commission or the registrar under the Act or this regulation may be served personally, by ordinary mail, by electronic mail, by fax or by another method that allows proof of receipt. 29(2) A document sent by ordinary mail to the commission or the registrar is deemed to be received on the fifth day after the day of mailing, unless the intended recipient establishes that, acting in good faith, he or she did not receive the document, or did not receive it until a later date. 29(3) A document sent by electronic mail or by fax to the registrar or the commission, or to a person employed by the registrar or the commission, is deemed to be received the first business day after it is sent unless the intended recipient establishes that, acting in good faith, he or she did not receive the document, or did not receive it until a later date, because of absence, accident, illness or other cause beyond his or her control. Failure to comply 30 A failure by a mortgage broker, salesperson or authorized official to comply with a requirement of this regulation is (a) a ground for suspension or cancellation of the person's registration by the commission under section 5 of the Act; and (b) a ground on which the registrar may refuse to renew the person's registration. Repeal 31 The Mortgage Dealers Regulation , Manitoba Regulation 180/87, is repealed. Coming into force 32 This regulation comes into force on the day it is registered under The Regulations Act or on the day that Part 1 of The Mortgage Dealers Amendment and Securities Amendment Act , S.M. 2009, c. 16, comes into force, whichever is later. SCHEDULE Form 1 Surety Bond Form 2 Trust Compliance Report Form 3 Statutory Declaration