In order to better protect investors and lenders, effective July 1, 2018, the Government of Ontario made regulatory amendments to Ontario Regulation (O. Reg.) 188/08 Mortgage Brokerages Standards of Practice under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA). These changes affect non-qualified syndicated mortgages, and require brokerages that deal with non-qualified syndicated mortgages to comply with expanded requirements.
What is a non-qualified syndicated mortgage?
A non-qualified syndicated mortgage is a more complex, higher risk product that may not be suitable for the average investor. It is a mortgage that does not meet the regulatory definition of a qualified syndicated mortgage.
What is a qualified syndicated mortgage?
As defined in the amended regulation a qualified syndicated mortgage is a syndicated mortgage that meets all of the following criteria:
- It is negotiated or arranged through a mortgage brokerage.
- It secures a debt obligation on property that,
- is used primarily for residential purposes,
- Includes no more than a total of four units, and
- If used for both commercial and residential purposes, includes no more than one unit that is used for commercial purposes.
- At the time the syndicated mortgage is arranged, the amount of the debt it secures, together with all other debt secured by mortgages on the property that have priority over, or the same priority as, the syndicated mortgage, does not exceed 90 per cent of the fair market value of the property relating to the mortgage, excluding any value that may be attributed to proposed or pending development of the property.
- It is limited to one debt obligation whose term is the same as the term of the syndicated mortgage.
- The rate of interest payable under it is equal to the rate of interest payable under the debt obligation.
(3) A syndicated mortgage that secures a debt obligation incurred for the construction or development of property is not a qualified syndicated mortgage.
New rules for syndicated mortgages
The new rules state that mortgage brokerages that deal with non-qualified syndicated mortgage transactions must:
- Use a FSRA form to collect information related to the financial circumstances, needs, objectives, risk tolerance and level of financial and investment experience, of all potential investors or lenders.
- Use a FSRA form to complete and document a suitability assessment, using specific criteria, of all potential investors or lenders.
- Use a FSRA form to collect and document expanded disclosure information. This includes property appraisal information, and in cases where a borrower is not an individual, the borrower’s financial statements.
- Observe a $60,000 limit on non-qualified syndicated mortgage investments over a 12-month period. This is for investors or lenders who are not part of a ‘designated’ class of investors and lenders that have already met higher income and asset tests.
(A full description of all designated classes can be found in the amended regulation.)
- Report all written complaints about non-qualified syndicated mortgages to the CEO of FSRA within 10 business days of receiving the complaint.
Where to find syndicated mortgage forms
The following syndicated mortgage forms can be found in our Forms Directory.
- Form 3.0 – Investor/Lender Information for Investor/Lender in a Non-qualified Syndicated Mortgage
- Form 3.1 – Suitability Assessment for Investor/Lender in a Non-qualified Syndicated Mortgage
- Form 3.2 – Disclosure Statement for Investor/Lender in a Non-qualified Syndicated Mortgage.
Need more information?
Read our FAQ for syndicated mortgages
View checklists for non-qualified syndicated mortgage forms
Read our mortgage brokering bulletins.