Vendor Take Back Mortgages

What is the fundamental issue?
Under proposed amendments to mortgage lending legislation, REALTORS^® were required to register as a mortgage broker with the Financial Services Commission of Ontario (FSCO) in order to facilitate a vendor take back mortgage (VTB) during a real estate transaction.

I’m a REALTOR^®. What does this mean to me?
For more than 80 years REALTORS^® have been able to arrange VTBs. A significant part of the real estate professional’s job is to negotiate the terms & conditions of the sale/purchase of real property.

The costs of registering as mortgage broker are considerable. For example, in Ontario a mortgage broker must successfully complete a Mortgage Broker Education Program from an approved provider, pay a bi-annual fee of nearly $500 and maintain errors and omissions insurance.

Legislative/Regulatory Status/Outlook
In November of 2007, the Government of Ontario passed the Mortgage Brokers, Lenders & Administrators Act (MBLAA), 2006.

OREA was able to convince Ministry of Finance and FSCO officials that VTB mortgages are adequately regulated by the Real Estate and Business Brokers Act (REBBA) 2002, that arranging a vendor take-back mortgage was not in fact brokering mortgages, and that providing a specific exemption for vendor take-back mortgages was the best way to resolve the issue.

A regulation exempting VTB mortgages was included in the MBLAA when it came into force on July 1, 2008. As a result, Real Estate Council of Ontario (RECO) registrants may arrange VTB mortgages without being registered as a mortgage broker.

OREA Position
OREA believes that REALTORS^® have sufficient oversight under REBBA. Additional regulation under other legislation would create an undue burden on a real estate professional’s ability to earn a living.

Similarly, forcing REALTORS^® to register as mortgage brokers is unnecessary since they are already regulated by the Real Estate Council of Ontario.

Last updated: June 26, 2009