Leave it to the BC real estate market to rattle some cages. Only this time, it’s BC’s mortgage broker regulator, FICOM, that has its hands on the bars. Described as “contentious,” FICOM’s new compensation disclosure guideline has now been in effect for 1.5 months. In broad terms, it changes the disclosure form to show you how much commission is being paid to your broker. And we’re talking about to the penny here folks. See the new rules from BC’s mortgage broker regulator and how they affect you below.
Described by Canadian Mortgage Trends as “one of the most pivotal and contentious regulatory issues ever faced by mortgage brokers in B.C.” this new regulation would require all mortgage brokers to disclose compensation as well as “perks” given to us by lenders. Before I go on however, I would like to point out one interesting little tidbit: the banks will not have to disclose anything. This means not only is it our sole responsibility, there is no equal share of burden being met by the competition. Not only that, no other field–including financial advisors–will need to uphold these same requirements. I digress…
FICOM’s stance is simple. You, as a borrower, should be privy to things like my finders’ fees, volume bonuses, potential travel, and potential efficiency bonuses. It’s a lot like being named Prime Minister, except that even he doesn’t seem to disclose this much stuff. We must disclose that we’re being paid by a lender, as well as any conflicts of interest. All this is to protect the borrower, so that we don’t wind up trying to push a lender on you for our own gain or benefit.
Hard to argue against that.
FICOM has made some pretty good arguments for why these changes were necessary. For example, the sheer nature of the financial services that we offer is complicated even for us. For the consumer, it must at times look like trigonometry. Because of this, clients rely heavily on our guidance. Were any one of us to go rogue and allow ourselves to be swayed by lucrative incentives, you could be the one that loses. Form 10, as it’s known, will change that, says FICOM.
But Form 10 is not all unicorns and rainbows either. For one thing, the Bank of Canada has found that mortgages organized by brokers typically cost consumers far less than those from banks or credit unions (again, who won’t have to disclose any information). Not only that, borrowers have no real gauge upon which to measure how much commission is standard on any given deal. While it may seem hard to believe that the compensation mortgage brokers receive doesn’t directly affect the amount our clients must pay, in my experience this has certainly been the case. As a mortgage broker, my reputation is more important than any one commission. And in the end, an unhappy client will cost me much more business than that bonus could ever replace.
Perhaps most damaging of all the effects Form 10 could potentially have on our business, is what it says to the consumer. The very necessity of a regulating measure seems to communicate mistrust from the get-go, even where and when it is not deserved. This may just cause more suffering for the client, who feels they are likely to be taken advantage of by a system that’s out to take them for all they’ve got.
In my experience the outcome so far has been pleasant. In some cases I have had my clients shockingly asking me “is that it?” The long term effects will be for time to come. In the interim, choosing an experienced mortgage broker with good referrals and a solid work ethic is the best insurance you can buy yourself.