Chapter 18: Borrower Disclosure

True or False Questions

1.      One of the things that must be disclosed to both the borrower and the lender is the role of the brokerage.

True – the Borrower must be informed who the brokerage is working for, the Borrower or the Lender or both

2.      The nature of the relationship between the brokerage and the borrower must be included in the disclosure document to the borrower.

True

3.      A brokerage fee must be disclosed to the borrower and included in the cost of borrowing.

True

4.      To comply with the MBLAA and its Regulations a borrower disclosure document should state “refer to the lender’s commitment’ to disclose the lender’s terms and conditions.

False – the document should include those terms and conditions

6.      If a prospective mortgage was default insured by CMHC, the insurance fee would have to be included in the cost of borrowing.

False – only the PST on the insurance fee must be included in the cost of borrowing.

7.      Lawyer’s fees, excluding disbursements, must be included in the cost of borrowing.

False – Disbursements must be included

Short Answer Questions

1.      List the types of information (e.g., risks) that must be included in a borrower disclosure form.

·         fees and payments associated with the mortgage

·         the nature of the relationship between the brokerage and lender under the proposed mortgage

·         the role of the brokerage

·         the number of lenders the brokerage represented during the previous year

·         any potential conflicts of interest

·         the risks associated with the proposed mortgage

·         the terms and conditions of the proposed mortgage

·         estimated costs

·         the cost of borrowing

 2.      Explain the timing requirements of providing disclosure to a borrower.

Disclosure must be provided to the borrower at least two business days before the borrower is required to make any payment or enter into the mortgage agreement; however, the two business days may be waived if the borrower consents in writing and the disclosure is still made before the borrower is required to make any payment or enter into the mortgage agreement

3.      List the specific costs that must be included when calculating the cost of borrowing.

·         administrative charges including charges for services, transactions or any other activity in relation to the mortgage

·         lawyer’s fees, including disbursements, for a lawyer hired by the lender and paid by the borrower (the majority of cases)

·         insurance charges, excluding default insurance premiums for high-ratio mortgages

·         appraisal, inspection or survey costs payable by the borrower, when required by the lender

4.      How must the cost of borrowing be expressed in a borrower disclosure form?

The cost of borrowing must be disclosed as an annual percentage rate, section 8.1 of Regulation 191/08 states that it must also be disclosed in dollars and cents over the course of the term for all fixed and variable rate mortgages.

5.      When or under what circumstances would a Broker not have to supply his or her borrower with a borrower disclosure form?

If the brokerage does not require the borrower to pay for any of its services, including disbursements, transaction or other activities in relation to the mortgage, and the lender is a prescribed lender as found in section 1.2, and the lender provides its own disclosure that contains the information required by this disclosure, the brokerage is not required to provide the borrower with its own disclosure document.