New Home Warranty Coverage

• New home warranty coverage is mandatory for home builders in some provinces for new homes and condominiums.
• Builder's warranties typically offer a one-year warranty on minor items such as scratched paint, broken drywall and chipped tiles.
• In Alberta, new home builder warranties are not mandatory.
• Coverage and condominium warranties can differ between home warranties.
• Ensure any lender criteria are covered within the warranty.
• Third-party new home warranty providers like Alberta New Home Warranty or National Home Warranty are private, not-for-profit companies.
• These companies are established by the home-building industry, and not by insurance companies or government organizations.
• New home warranty certificates offer coverage for up to five years, protecting homeowners after any one-year builder's warranty expires.
• Lenders may require the borrower to purchase new home warranty certificate coverage in some cases.

Offering versus Selling Insurance

• Anyone who offers or sells insurance must be licensed under the Insurance Act .
• There is a distinction between offering and selling mortgage life insurance.
• Offering only allows you to discuss the pros and cons of mortgage life insurance in generic terms and offer mortgage life insurance products from a single insurance provider (either a private insurance company or the lender).
• A restricted insurance license is needed to offer mortgage life insurance to applicants.
• Information about becoming licensed to offer or sell mortgage life insurance products can be found on the Alberta Insurance Council website or websites of private mortgage life insurance companies.

Product Sheets

• Mortgage insurance product sheets, lender product sheets, and creditor insurance product sheets are important for lender and borrower security.
• All parties to a transaction should be fully aware of the product's information to avoid surprises.

Mortgage Insurance Product Sheets

• Mortgage insurance product sheets are a critical tool for both lenders and borrowers.
• They provide information about the insurance policy and its benefits, clarifying questions such as what the insurance covers, who receives the benefit if the borrower defaults, when it is required, how the premium is calculated, and who pays for the premium and how it can be incorporated into the borrower's mortgage.

Lender Product Sheets

• Lender product sheets are informational documents that lenders provide to borrowers.
• They outline the terms, features, and requirements of various loan products.
• The purpose is to enhance transparency and enable borrowers to make informed decisions about their financing options.
• Understanding product details like payout penalties, early payment options, and transferability criteria helps ensure a borrower knows what to expect and protects the lender from potential false claims.

Creditor Product Sheets

• Creditor insurance product sheets serve as a comprehensive document.
• They outline the features, terms, and conditions of creditor insurance policies offered by lenders.
• Creditor insurance is designed to provide financial protection to borrowers and lenders in the event of unforeseen circumstances, such as death, disability, or unemployment.
• The questions a product sheet clarifies are who pays for the insurance and how the policy cost is calculated, who the beneficiary is and when the policy is used, and how the insurance differs from personal life insurance.
• Product sheets facilitate informed decision-making and enhance security for all parties involved in lending.

Conclusion

• A broker is an important conduit between the lender and the borrower.
• Good record-keeping can help to maintain relationships smoothly.
• Next unit focuses on record keeping and compliance requirements.

Introduction to Record Keeping

• Requesting, compiling, verifying, and storing documents is critical to underwriting success.
• The unit covers record keeping, file management, closing out files, maintaining client contacts, and mortgage broker compensation.
• Upon completion of this course, individuals will be empowered to:
  • Identify records in a mortgage application file.
  • Identify Alberta's key mortgage file management regulations.
  • Weigh the advantages and disadvantages of electronic versus paper records.
  • Follow steps in creating a mortgage file with origination software.
  • Determine the impact of privacy legislation on Alberta's mortgage industry.
  • Understand best practices for upholding client information privacy.
  • Understand disciplinary consequences for non-compliance with regulations and standards.
  • Identify compliance process steps and participating personnel.
  • Identify mortgage broker compensation methods.
  • Understand how to maintain professional client relationships.

Record Keeping and File Management Tasks

• Section 12 of the Real Estate Act authorizes regulators to set rules for licensees, including those about retaining records of deals (closed and incomplete)

• 12(1)(m) requires licensees/former licensees to keep records and books of account and respecting the contents of the records/books of account.

• The time in which items must be kept may not exceed a period of 3 years after the person becomes a former licensee.

• RECA, Canada Revenue Agency, and privacy legislation requirements mandate that records must be:

  • Complete and accurate
  • Properly stored to protect against improper access to client's personal information.
  • Retained for the prescribed amount of time, which is longer at the brokerage level.

Mortgage Application Files

• A mortgage application/loan application is a paper or electronic mortgage application form that includes:
  • Consent forms
  • Disclosures
  • Notes
  • Explanations
  • Supporting documents for a specific loan application
• Brokerages must maintain a separate loan file for each mortgage application, per s.105 of the Real Estate Act Rules, whether the application is funded or not.
• All records received should be kept during a mortgage application even if the application is not successful.
• A loan file includes copies of all documents/communications related to the transaction:
  • Signed, written consent to access personal information (such as a credit report).
  • Applicant's credit report.
  • Mortgage application file, renewal agreement, etc. (all mortgage instruments).
  • Signed disclosures and service agreements.
  • Applicant's personal identity documents.
  • Employment and income verification.
  • Sources and proof of down payment.
  • Proof of assets, investments, or other equity.
  • Subject property documents such as an offer to purchase, condo documents, copy of the title, or Real Property Report.
  • Insurance application forms, signed waivers, etc.
  • Proof of separation, divorce, child support, etc.
  • Proof of consumer proposal or bankruptcy.
  • Proof of dissolution of business or partnership.
  • Copies of communications via email, text messaging, social media, meeting notes handwritten or electronic, and other correspondence about the transaction.
  • Corporate searches.
  • Land title searches.
• RECA must be able to access all files.
• Mortgage brokerages must retain mortgage deal records for three years after the end of the mortgage term.
• RECA may extend the required retention period if an investigation has been opened regarding your records.
• Equifax and insurance companies expect documents to be maintained for the lifetime of the mortgage.
• Canceled, non-approved, or unsuccessful transactions must be retained.
• Section 82 of the Real Estate Act Rules allows brokers to establish their own strategies and systems.
• All files must be identified and secure.
• Review the RECA Information Bulletin on keeping mortgage brokerage records.
• Brokers must communicate the brokerage's policies/procedures to associates, associate brokers, and unlicensed staff.
• Comply with such policies.
• The brokerage record-keeping policy/procedure:
  • The storage location and medium are reliable.
  • Users must identify themselves by username/password or biometric access.
  • The brokerage can determine who created and modified the electronic record and when.
  • The brokerage retains an "original" copy of the electronic record before modification.
  • THe brokerage can determine who sent/received the electronic record, and when the electronic record was sent/received.
  • The information in electronic form is maintained in its original format.
  • The brokerage can view, reproduce, and print documents in a timely manner.
  • The proposed system safeguards the document in electronic form.
  • Electronic records are stored and linked to create a complete record.
• Brokers will provide instruction on how to manage transaction-related documentation.

Maintaining Physical and Electronic Loan Files

• There are requirements for maintaining both physical and electronic documents.
• Brokerages maintain separate physical loan files for each mortgage loan application.
• The following items must be kept:
  • The application itself.
  • Signed consent forms and disclosures.
  • All supporting/verification documents.
  • All notes.
  • Correspondence (including email).
  • Photocopies of all original documents viewed.
  • Paperwork pertaining to mortgage protection insurance.
• Document maintenance is the responsibility of the brokerage and associates.
• Documentation strategy must meet compliance/client privacy.
• Associations should be able to access records when others are unavailable.
• At the end of each transaction (whether approved or not), associates are responsible for:
  • Turning over all documents, notes, emails, etc., to the brokerage.
  • Destroying any copies on personal computer or electronic devices.
• The Real Estate Act Rules and privacy laws require client documents to be provided to the broker in a timely manner.
• Paper copies/related information stored must be disposed of as specified by brokerage's policies.
• Per the Real Estate Act Rules, a mortgage associate must provide their broker with: Original documentation and copies of original documents provided to the parties or maintained by other brokerages (i) related to mortgages dealings, and (ii) required under the Act and these Rules.

Using Mortgage Origination Software

• Mortgage origination software aids you in managing the mortgage transaction at almost every step.
• You can electronically prepare, manage, maintain, submit, and track mortgage loan applications from anywhere with Internet.
• Brokerages use origination software to ensure their associates follow their procedures.
• Brokerages set policies that govern associate permissions and expectations.
• For example, the brokerage may limit an associate's pulling consumer credit bureau reports initially or require a senior associate's review prior to submission.
• Brokerages audit files for adherence to policy through generated reports.
• Brokerages are responsible for associates activities and can restrict or remove associate's access for not following policy.

Differences Between Private and Commercial Lenders

• Commercial mortgage brokerages and many private lenders do not use mortgage origination software.
• Reasons for not using software are:
  • Most origination software designed to manage residential applications
    • Lower volume from commercial and private lenders does not generally warrant the cost of integrating the necessary data fields
  • Private lenders have different criteria for assigning loans and do not typically need the complexity or functionality of the mortgage origination program
  • The cost associated with using origination software which is cost-prohibitive for small-volume operations
• An alternative to origination software is using software for such features as accessing credit bureau, but completing the rest manually
• Other alternative is to complete the software program as much as possible and fax or email other required material and to enter responses into electronic system for tracking and compliance

Common Tasks

• Brokers can prepare files by following the below steps:
  • Create a new loan application file.
  • Enter the application type and purpose.
  • Enter the applicant's personal information (identification information, current address and history, mailing address).
  • Enter employment information.
  • Enter income information (confirm for accuracy and completeness.)
  • Enter liability information.
    • If mortgage protection insurance discussions were not yet discussed with applicant, discuss and add appropriate paperwork
  • Enter asset information (ensure data is based on final results and is accurate)
  • Get written consent and pull borrower's credit report.
    • Some lenders have a requirement of only accepting credit reports 30 days old or newer
  • Enter property details.
    • Conduct google searches of the applicant's name, employer, and property to verify the information.
  • Enter mortgage information.
  • Enter mortgage request details.
  • Add qualifying details.
  • Add applicant(s).
  • Recalculate and update with borrower.
  • Enter the lender submission information.
  • Add lender notes.
  • Validate the file and correct any errors.
  • Submit to the lender.
• Mortgage origination software provides assistance for creating suitable applicant and lender matches, and CRM integrations.
• CRM systems can increase time savings.
• When adding to the customer database (CRM), ensure CASL and existing privacy legislation guidelines are followed.

Privacy of Personal Information

• Mortgage brokers collect, use, and disclose personal client information and have privacy obligations.
  • The Personal Information Protection & Electronic Documents Act (PIPEDA) legislates the collection, use, and disclosure of personal information at the federal level.
  • The Personal Information Protection Act of Alberta (PIPA) concerns private-sector organizations in Alberta.
  • The Real Estate Act Rules addresses the collection, use and disclosure of information for real estate transactions.
• Brokerages have moved from paper files to storing records electronically.
• Electronic documentation provides convenience but must follow practices in security to protect consumer's confidential information. Advantages to electronic storage: - Access from anywhere, anytime. - Transparency on when a document was sent to whom by whom. - Able to be collected in a central location. - Able to store many documents and versions. - Easy to share documentation across different avenues. Negatives to electronic storage: - Encrypted information may be stolen or misdirected. - Information may be retained on unused services. - Storage must adhere to federal and provincial regulations - A thorough understanding of the technology may be lacking
• Broker will explain policies on how personal client information is collected, used, disclosed, maintained and disposed of.
• The brokerage's policies/procedures manual may also contain these instructions.
• Associates must be aware that they are responsible for this and that information is available when contacting the brokerage of any questions.
• Broker should explain the plan about a breach of privacy.
• Breaches of privacy: - Loss/theft of a USB stick, computer, or other electronic devices with client data - Unauthorized access to client data - Submitting electronic documents by unsecured channels. - Emailing/Faxing client data to someone not authorized to have it.
• Industry professionals must: - Only collect required personal information and obtain consent first. - Limit access to personal client information. - Keep personal client information as long as required by federal and provincial legislation. - Ensure that information is securely stored per: brokerage policy, the Real Estate Act Rules, and the Personal Information Protection Act of Alberta - Ensure all personal client information is disposed of in an approved manner.

Regulation Impacts

• Mortgage professionals must practice and use confidential information
• Government follows suit, but lags with technology and electronic information
• brokers need to be careful when collecting, storing, and distributing information
• additional transparency is needed around how, why, when information is shared, and for what purpose

How CASL & PIPEDA affects Mortgage Industries

• Distributing advertisements has become easier in this digital era, however CASL and PIPEDA legislation was started.
• Canadian Anti-Spam Legislation (CASL) and the Personal Information Protection and Electronic Documents Act (PIPEDA) regulate this to: what what is considered acceptable behaviour, what rights individuals had to reject unwanted solicitation, and what protections to their personal information.
• Under CASL regulations, brokerages and associates, you are requried to:
  • modify email campaigns
  • obtain permissinos from consumers
  • have a clear "unsubscribe" button.
  • have a consumer's decision to receive emails be documented.
• PIPEDA provided strong protection for consumers to understand:
  • who had access to their personal information,
  • what it was
  • who had access, and
  • what it was used for.
• When associates moving from one brokerage to another would generally take consumer data, they are now required to demonstrate they have that explicit permission because past PIPEDA requirements.

Failure to Adhere to Regulations

• Compliance with the rules is important:
  • personal client information is required by federal and provincial
  • personal client information is securely stored per the brokerage policy, based on provincial regulations, Real Estate Act Rules, and PIPEDA
  • communication with clients adheres to federal standards like CASL
• Complying with requirments can lead to financial penalties in dollars, professional disbarment, or possible criminal charges for fraudulent activities.
• RECA handles the complaints, investigations, hearings, and discipline of its members, and has summarized cases and the penalties, as well as lessons they have learned for their members.

Receiving Compensation

• At the end of the mortgage transaction, broker compensation is made
• The lender compensates the brokerage, and they compensate you
• standard compensation: compensation models
• commission vs salary
• brokers and associates are paid commission instead of salary
• staff are salaried or a combined with full-time, salaried, or on commission

Split Commission

• You will split your commission
• It is negotiated as part of employment agreement
• Fee splits vary from brokerage to brokerage, it is based on: experience, demonstrated sales volume, and more
• Brokers can offer 90/10 in which the associate receives 90% of that commission, and the brokerage gets 10%
• A new mortgage associate receives direction and support from their broker, so a brokerage may offer a lower percentage
• Brokers can offer associates 100% commission but charge a monthly fee of $500 to $1,000
• Discuss, understand, and negotiate all aspects of your commission split before signing

Basis Points (BP)

• The general "unit" of compensation for mortgage brokers and associates
• Compensation basis points per deal, pre-set by lenders, are non-negotiable
• There are 100 basis points in 1%, so 1 bp = 1/100 of 1%
• Finder's fee on a $100,000 deal is 50 bp
• Brokerage will receive $500
• as mortgage associate for that deal, they will receive a portion of said finder's fee

Commission Based Models

• Different commission based compensation models include:
  • Referral fees
  • Brokerage fees
  • Finders fees
  • Trailer fees
  • Volume bonus.
  • Value bonus/efficiency or funding ratio bonus
  • Lender incentives
• Lenders can combined compensation models
  • Ex: finder's fees + base commission
• The possibility for the broker or associate to receive rate discounts on some products without affecting compensation basis points.

Referral Fees

• A referral fee is a single payment
• It is made by one brokerage to another to secure a client, and their mortgage is approved
• Referral fees must be administered between brokerages, not individual members

Brokerage Fees

• some brokers charge additional fees to the applicant, depending on policy
• fees are paid to you as a part of compensation

Finder's Fees

• Finder's fees (upfront fees) are one-time and of payments from the lender
• Finder's fees are based on loan amount and term length.
• The brokerage typically splits the fee with the broker associate based on the employment and compensation agreement with the brokerage.
• A fixed-rated mortgage might pay 45 bps, and it might pay 75 bps for a longer term for the same rate.

Trailer Fees

• Trailer fees are based on a model where one receives a lower upfront fee at deal close
• Then receive a small recurring fee on the anniversary date of the deal which is the lifetime of the loan.
• Lump-sum may be 75 BPs, with 10 to 15 every year for the initial term.
• If borrower renews mortgages they receive the renewal plus trailer fees; may pay insurance

Volume Bonuses

• Volume bonuses will be offered at a brokerage level
• called aggregate volume model
• Some lenders might do bonuses at the lender level
• These may or may not be split depending on contract

Value Bonuses

• related to efficiency or funding rating
• with this an individual is paid to the number of deals approved to submit to lenders
• different lenders, difference efficiency or fund rating, and prime lenders may have better expectations

Lender Incentives

• encourage mortgage associate performance and lender loyalty
• comes in many forms
• Ex: trips, rates discounts
• When working with clients on refinancing deals:
  • borrower can pay existing mortgage and new re-qualify with a prevailing rate, best compensation.
  • or can top up or blend which can secure a longer term, the new rate is based for the new agreement

Brokerage Requirements Prior To Compensation

• Regardless of the compensation model, the brokerage will have a compliance process that they expect the associate to follow before any commission is paid. Remember, the lender will pay the brokerage directly, not the associate. The associate must satisfy the brokerage requirements before the brokerage pays the associate.

Compliance Process

• Compliance begins as application closes
• The life cycle of submitting a compliance package includes;
  • The associate must compile an application
    • Close transaction with lender, update the application in origination software, indicate if closed, indicate to brokerage or payroll officer Once created associate, will present, upload, PDF to secure location, within days of closing The compliance officer follows updates on an application including, upload and compliance, notifications that a compliance package is available for those for review which include: broker of record, an individual designated, or a full time employee.
• If the package needs an update the compliance officer will alert associates
• Once the transaction closes, the lender sends the payment of fee
• The fees are validated by the payroll offer to confirm what the associate will be paid

Closing

• Maintaining communication with the borrow is important
• The transaction must be be closed for all parties so the loan is advanced
• Several keys include:
• *Customer Survey
• Provides communication, service, strength and weakness
• *Close-out Packages
• Consist of letter to give appreciation
• Amortization Scedules
• Information from Loan Folder
• Warranty programs
• Cleaning
• Follow all guidelines on Personal Data Security
• Asking for referrals
• Provides a good experience to that relationship going forward

Private Lending Introduction

• General of private mortgage and product, what their specialize

• Understandable to:

  • If between between private and institutional
  • Describe reasons to borrow from private lenders
  • Identify the forms
  • The process of submitting to the private lender

• *What is Private Lending

• Loans, finance resources or Syndication, compared and regulated by loans in debt of Canada Non-Institutional with access, insurance through Housing Associate

What to Finance?

Construction land development, multiple mortgages, business for self, bridge and interim, closure, investments, and non conforming properties Terms for lending

• No penalty
• close funding
• short term fund properties
• Criteria flexible

Institutional Lenders

• Financial alternative to overcome traditions barriers, and needs close typically institution
• less strict, if the borrower is poor, a number a second a third consolidation
• threshold low
• properties Institutional won't entertain, vendor, etc
• Flexibility comes at a cost which includes:
• May renew, risk

Funder Structures

• individual own forms for mortgages
• Can help with loans and set rates
• Sycnaticates- where one investor means to be the security of Loan
• Underweight Facilitating - groups of investors that can be too big

Mortgage Investors

• Capital which pools to all mortgages Required. 100%
• to distribute with shareholders (Tax Income)
• no party owns more then 25$
• -50%

Regulations

• Regulate high levels
• real and securities need regulation, by state
• Licensing with state and brokers

Real Estate Regulation

• Comaply Consumer Act
• Licensed
• Council recommend and
• Represent Lenders in this - case
• Disclosure and Service are signed and must declare
• Conflicts of interest
• Loaning their own funds
• family members funds Must not represent best iterest

Application

• Gathering Information All have dif terms which are interest/ fees
• Amonts
• close and fun
• Properties? Exisiti Statergy
• should not be suggested for long term options with rates higher.
• Be prepared to exit
• Be very clear and transparent

Loan Documents

Same documentation as lenders

• Application
• Credit
• Tax
• Pay subs
• Statement

Credit Bureau

• al persons on account
• identity porblems and status
• Lenders Notes
• Address
• Purpose Loan worth it
• Exit Strategy consideration

Private Approvals

• Lender approves Borrower Mortage request and you will get commit
• TIPS DONT always assume

Closing Recomend- a Lawyer to help

The Administration Process

• As a broker, practicing proper mortgage administration includes correct contact
• • Commitment between Lender and Borrower
• Legal And Insurances 3P
• Review diligence
• Statements
• Rent Rolls
• Operating Statements
• Lleases
• Documents
• Incurance Anticipated Funding
• Wire Money to Broker and all fees

Management

Paymernts

• Collection of payments
• Tax Pay
• Annual Incurance There are key argreements to take place as well such as Servicinf Agreement
• Name Contact information etc Terms of termination and agreements

Other Steps

9 - Software required for administration to find complexity Pay close attention and tips to remember Final Steps to the guide to lending

• Property Payments, Determine the Location
• Multiple Incurrence
• Collect taxes with Payments or lender will request the to pay

Property Payments

• Provide Proof as well
• 15 days prior the process a satameant
• Final Payment you will need insurance payment
• Review Borrows in case it is not in time

Collection Process

• Mortage has secrutiy on a debt
• Borrowers payments
• REMODIES Available
• Enforecment are regulated act

Mortagage Default Section

• Covance Section
• Foreclosed -action to lender following the default
• Action can transfer property.
• Lawyer section 40 of act
• No action.

Step 1 Borrower Default

• Typically when borrower missed on payments.
• Lender can pay to court of the kings bench.
• Court enter the date to take to pay the off the debt 3rd stage

Set Demand letter

• Foromal and issued by client, and lawyer or instruction
• *Steps

1. Demand lender, take to court.
2. Step 4 statement when client cannot pay.
3. Take action and get lawyer

Lender's fees for the following includes:

• Full and cost fees
• Estate appraiser
• Inspection
• Maintenence

Foreclosure Process

The lender initiates the foreclosure and the borrower doesnt pay Foreclose Proeed by default of terms and such of property, taxas,etc by ACT. Then albertas and ruls regulate process.