BC Sub-mortgage Broker cheat sheet

The BC Financial Services Authority (BCFSA) administers the Mortgage Brokers Act and licenses mortgage brokers, submortgage brokers, and mortgage agents.

A submortgage broker must be licensed under a licensed mortgage brokerage and may not deal directly with the public unless supervised by a designated individual.

Licence categories include mortgage broker (may carry on business independently), submortgage broker (works under a brokerage), and mortgage agent (restricted activities).

Continuing education: licensees must complete BCFSA-approved courses; failure to meet CE deadlines can result in licence suspension or non-renewal.

Licensees must maintain errors and omissions insurance and comply with trust accounting rules for client funds.

Disclosure of conflicts of interest and written service agreements are required before providing mortgage services.

BCFSA conducts examinations and can impose penalties, suspend, or cancel licences for misconduct or non-compliance.

Licensees must report changes in personal information (e.g., name, address) to BCFSA within specified timelines.

Advertising and business names must be approved by BCFSA and must not be misleading.

Fixed-rate mortgages have an interest rate that remains constant for the term, providing predictable payments.

Variable-rate mortgages have an interest rate that fluctuates with the lender's prime rate; payments may change or remain fixed with a variable term.

Open mortgages allow prepayment without penalty; closed mortgages restrict prepayment and may impose penalties.

Home equity lines of credit (HELOCs) are secured revolving credit facilities with interest-only minimum payments.

High-ratio mortgages (loan-to-value > 80%) require mortgage default insurance from CMHC, Genworth, or Canada Guaranty.

Conventional mortgages (LTV ≤ 80%) do not require default insurance but may have higher interest rates.

Second mortgages are subordinate loans secured against the property, often used for debt consolidation or down payment.

Reverse mortgages allow homeowners aged 55+ to access home equity without regular payments; interest accrues until sale.

A completed mortgage application includes borrower identity, income, assets, liabilities, and property details.

Lenders require a signed credit authorization to pull credit bureau reports.

Income verification: salaried borrowers provide employment letters and pay stubs; self-employed borrowers provide tax returns and financial statements.

Down payment verification: funds must be from verifiable sources; gifts require a signed gift letter and proof of transfer.

Property appraisal or automated valuation confirms market value and condition.

Title search and title insurance protect against encumbrances and fraud.

Mortgage commitment letter outlines terms, conditions, and financing obligations.

Closing documents include the mortgage contract, promissory note, and registration of the charge on title.

Gross Debt Service (GDS) ratio = (Principal + Interest + Property Taxes + Heating + 50% Condo Fees) / Gross Annual Income × 100%; maximum 32% for most lenders.

Total Debt Service (TDS) ratio = (GDS expenses + All Other Debt Payments) / Gross Annual Income × 100%; maximum 40% for most lenders.

Loan-to-Value (LTV) ratio = Mortgage Amount / Property Value × 100%.

Stress test: uninsured mortgages must qualify at the greater of the contract rate + 2% or the Bank of Canada 5-year benchmark rate.

Monthly payment for a fixed-rate mortgage: M = P × [i(1+i)^n] / [(1+i)^n – 1], where i = annual rate / 12, n = amortization in months.

Amortization period is the time to pay off the mortgage; term is the length of the current interest rate agreement.

Prepayment penalty for closed mortgages: three months' interest or interest rate differential (IRD), whichever is greater.

Maximum amortization for insured mortgages is 25 years; uninsured can be up to 30 years or more depending on lender.

Fiduciary duty: brokers must act in the client's best interest, disclose conflicts, and avoid self-dealing.

Written disclosure of remuneration from lenders (e.g., finder's fees) must be provided to the borrower.

Privacy legislation (PIPEDA) requires consent for collection, use, and disclosure of personal information.

Anti-money laundering (AML) obligations: verify identity, report suspicious transactions, and keep records.

Fraud prevention: brokers must not knowingly submit false information or omit material facts.

Dual agency: representing both borrower and lender requires written consent and may be prohibited.

Client confidentiality must be maintained unless disclosure is required by law or authorized by the client.

Advertising must be truthful, not misleading, and include the brokerage name and licence number where required.

Client identification: verify government-issued photo ID and cross-reference with credit bureau and other documents.

Red flags of fraud: inflated income, fake employment letters, undisclosed debts, and pressure to close quickly.

Document verification: confirm pay stubs, tax returns, and bank statements using third-party sources or direct employer contact.

Protect against identity theft: never accept photocopied ID without seeing the original; check for inconsistencies.

Maintain a client communication log to document advice, disclosures, and instructions.

Use secure channels for transmitting sensitive documents; avoid unencrypted email for personal information.

Report suspected fraud to the brokerage's compliance officer and, if required, to BCFSA and law enforcement.

Vulnerable clients: take extra care to ensure understanding and capacity; consider involving a trusted contact or legal advisor.