New supervision plan focuses on protecting consumers in private mortgage market
Ontario’s financial services regulator has released its Mortgage Brokering Supervision Plan for 2024-2025, maintaining its focus on consumer protection within the mortgage brokering sector.
The plan emphasizes the Financial Services Regulatory Authority’s (FSRA) oversight of private mortgages, given their growing market share and the increasing number of consumers turning to them amid challenging economic conditions.
Private lenders increased their market share of total mortgages to 20.4% by volume and 15.6% by value in 2023, up from 16.6% and 12.1%, respectively, in 2022.
“As economic conditions remain uncertain, it’s critical for mortgage professionals to understand their responsibilities,” said Antoinette Leung, head of financial institutions and mortgage brokerage conduct at FSRA. “Our plan maintains our priorities from last year to ensure the mortgage sector is following the rules, giving sound advice to consumers and safely handling their investments.”
In response, FSRA’s plan focuses on three key areas:
- Ensuring that brokerages and principal brokers foster a strong culture of compliance and fair treatment of consumers.
- Providing consumers with suitable mortgage advice and products, especially concerning private mortgages, which have become more prevalent.
- Ensuring that investors and lenders have confidence in mortgage administrators handling their investments properly.
A central concern for FSRA is the increasing reliance on private mortgages, especially for consumers who face higher costs and complexity with these products. The regulator is closely monitoring mortgage brokers and administrators to ensure they are providing appropriate advice and disclosing conflicts of interest.
FSRA also conducted exams of large brokerages, particularly those involved in private mortgage brokering and mortgage investment corporations (MICs). These exams assessed the effectiveness of compliance controls and the supervision of authorized agents.
FSRA examined brokerages responsible for funding approximately $850.6 million in private mortgages, which represented about 3.3% of all private mortgage fundings in Ontario.
The report also highlights the risks associated with mortgage investment sales and administration, particularly as rising interest rates make mortgage investments attractive to more Ontario investors.
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The financial watchdog is reviewing how private mortgage investments are sold and managed to protect consumers, especially those facing heightened risks due to high construction and financing costs in the current economic climate.
“We urge mortgage professionals to closely read the plan and all relevant guidance and publications to stay informed about their regulatory responsibilities,” FSRA said.
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