Mortgage Regulation Act – The New Regime is Here

Brian Tabor, QC, Simon McCormick and Eyoab Begashaw

The Mortgage Regulation Act (“MRA”), in conjunction with the regulations made pursuant thereto (“MRA Regulations”), will come into force on November 1, 2021 and replace the Mortgage Brokers’ and Lenders’ Registration Act. This will create a new regulatory regime to govern mortgage brokerages, mortgage brokers, associate mortgage brokers, mortgage lenders and mortgage administrators (collectively, “Mortgage Professionals”, and each a “Mortgage Professional”) in Nova Scotia.

The legislative and regulatory changes associated with the implementation of the MRA and the MRA Regulations are intended to help protect borrowers, prospective borrowers and private investors, as Mortgage Professionals will now be required to meet certain licensing, reporting, education and record-keeping requirements in order to operate in Nova Scotia.

Licensing

Effective November 1, 2021, Mortgage Professionals will, unless exempted from the requirement under the Mortgage Regulation Act Exemption Regulations (“Exemption Regulations”), be required to obtain a licence issued under the MRA in order to conduct business in Nova Scotia (MRA, s.12(2)). The nature of the business conducted by a Mortgage Professional will determine the type of licence that a Mortgage Professional may be required to obtain in order to comply with the MRA and MRA Regulations, and the MRA provides for the following classes of licence to be issued (MRA, s. 12(1)):

• Mortgage Brokerage Licence;
• Mortgage Broker Licence;
• Associate Mortgage Broker Licence;
• Mortgage Lender Licence; and
• Mortgage Administrator Licence.

In order to obtain or renew one of these licences, applicants will need to satisfy the criteria and requirements outlined in the MRA and MRA Regulations (MRA, s. 14(2)). The Mortgage Lender, Brokerage, Broker and Administrator Licensing Regulations (“Licensing Regulations”), in particular, set out a number of requirements that must be met by prospective licensees who wish to acquire, and licensees who wish to renew, particular classes of licences.

A licence issued pursuant to the MRA will expire on October 31 in the calendar year immediately after the year in which it was issued or last renewed (Licensing Regulations, s. 8). All licences will need to be renewed annually, and licensing fees will initially range from $300 to $600.

Exemptions

The MRA will not apply to persons or classes of persons who are exempted from its application by the MRA Regulations (MRA, s. 3(1)).

The Exemption Regulations state that the following persons and entities are exempt from the application of the MRA (Exemption Regulations, s. 3):

• banks and authorized foreign banks (s. 3(a));
• trust and loan companies (s. 3(b));
• cooperative credit associations (s. 3(c));
• insurance companies (s. 3(d));
• directors, officers, employees or other representatives of the entities listed above, when acting solely on behalf of such entities (s. 3(e));
• persons who undertake mortgage brokering or mortgage lending activities, but only if each mortgage related to such activities meets all of the following conditions (s. 3(f)):
  • the amount of the mortgage loan is greater than $1,000,000 (s. 3(f)(i));
  • the Cost of Borrowing Disclosure Regulations do not apply to the mortgage (s. 3(f)(ii));
  • the investors in the mortgage are not private investors or, if one or more of the investors in the mortgage are private investors, licensees or exempted persons broker the mortgages on their behalves (s. 3(f)(iii)).
• in certain circumstances, persons who refer prospective borrowers to Mortgage Professionals and vice versa (ss. 3(g)-(h), 4); and
• persons who undertake activities associated solely with syndicated mortgages regulated by the Securities Act (s. 3(i)) (for additional information respecting syndicated mortgages governed by the Securities Act, please see the article entitled “Changes to the Regulation of Syndicated Mortgages under Securities Laws” by Christopher Marr, TEP and David Slipp).

There are also some persons who may, without being exempted from the application of the MRA, be exempt from the requirement to obtain a licence under the MRA. For example, in certain circumstances, practising lawyers, trustees in bankruptcy, persons acting under a court order and people acting on behalf of a provincial government or the federal government may be able to act as a mortgage broker or mortgage administrator without obtaining a licence (Exemption Regulations, s. 7). Similarly, individuals and entities are permitted to act as mortgage lenders without being licenced, provided that they lend their own money, they do not purport to be mortgage lenders, and that, in any 12-month period, they only undertake mortgage lending activities with respect to a maximum of four mortgages that are cumulatively worth not more than $1,000,000 (Exemption Regulations, s. 8(a)).

General Obligations and Standards of Conduct

The MRA and MRA Regulations impose a number of obligations upon Mortgage Professionals, and Mortgage Professionals will, for instance, be required to comply with certain disclosure, reporting, and record-keeping requirements. While some of these requirements are included in the MRA, many of them are outlined in the MRA Regulations, namely the:

• Cost of Borrowing Disclosure Regulations;
• Compliance Officers Regulations;
• General Disclosure Regulations;
• Record-keeping Regulations; and
• Reporting Requirements Regulations.

Mortgage lenders and mortgage administrators will, unless exempted, also be required to designate compliance officers who will be responsible for ensuring that they are complying with the MRA and MRA Regulations and for corresponding with the Registrar (MRA, ss. 25(1), 35(1)).

Further, licensees will be required to comply with the standards of conduct set out in the MRA Regulations. The MRA Regulations include standards of conduct for each class of licensee.

Penalties

Mortgage Professionals who do not comply with the MRA will be guilty of an offence and liable on summary conviction (MRA s. 69(1), (3)). The Registrar may issue an administrative penalty in lieu of a summary conviction; however, an administrative penalty cannot be imposed in addition to a summary conviction in relation to the same contravention of the MRA (MRA s. 72(2)). Decisions and orders made by the Registrar pursuant to the MRA are final and may only be appealed to the Supreme Court of Nova Scotia if it is alleged that there has been an error of law (MRA s. 78(1), (2)).

An individual guilty of a summary conviction offence under the MRA may be fined up to $500,000, or sentenced for up to a year in prison, or be both fined and imprisoned (MRA, s. 69(3)(a)). A corporation guilty of an offence under the MRA may be ordered to pay a fine of up to $1,000,000 (MRA, s. 69(3)(b)).

Lastly, the directors and officers of a corporation that has contravened the MRA may be found guilty of an offence if they have authorized, allowed or acquiesced to the contravention, in which case they may be subject to fines and imprisonment, regardless of whether the corporation is prosecuted or convicted (MRA, s. 69(4)).

This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact a member of our Real Property group.

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