Sophisticated borrowers and lenders will be able to negotiate commercial mortgages through unlicensed channels if proposed regulatory amendments are enacted in Ontario. The draft regulation, currently posted for public comment on the provincial registry, arises from 2019 legislative recommendations pertaining to Ontario’s Mortgage Brokerages, Lenders and Administrators Act (MBLAA).

Drawing on stakeholder input at the time, Members of Provincial Parliament Doug Downey and Stan Cho maintained that some mechanisms meant to protect uninitiated consumers are unnecessary and cumbersome for entities such as large real estate companies, REITs, pension funds and property fund managers. In particular, they cited “requirements to receive or sign disclosure documents” as undue red tape.

The amendments would exempt qualifying lenders and mortgage brokers/dealers from the requirement to hold a mortgage brokerage license if they do business exclusively with designated sophisticated clients. Accompanying analysis notes that Sun Life Financial requested this exemption on behalf of its real estate subsidiary, BentallGreenOak, during the 2019 legislative review.

Thus far, policy drafters have identified seven existing licensed brokerages that could qualify for the exemption, but they do not have complete data on eligible lenders. Along with the opportunity to comment, the posting with the proposed amendments poses questions in an effort to gauge uptake. Submissions can be made until October 4.

The analysis concludes that the amendments should reduce regulatory burden and costs “for financially sophisticated entities whose mortgage transactions pose a low risk to consumers” and ensure that regulators’ efforts and resources are more efficiently targeted to the needs of consumers.