U.S. labour stats showed unexpected vitality Thursday, as Canadian traders await proof of job life on this side of the border. StatCan's employment report is the last major data point until the BoC interest rate decision.

Per usual, we'll have full coverage of the mortgage impact later this morning, once markets have had a chance to overreact.

Ontario's mortgage broker regulator recently released a new supervision plan for consumer protection.

Before doing so, it (FSRA) discovered several problems with the brokered mortgages it audited. Among them:

• 100% of private mortgage files "lacked documented suitability assessments and exit strategies."

• 29% of brokers omitted required charges from APR calculations.
• 51% of 6-month terms had APRs exceeding Canada's new threshold for a "criminal interest rate" (35%).
• 24% had estimated charges not labelled as estimates.
• 32% wrongly included some costs (like borrower legal fees) in APR calculations.

On the topic of APR disclosure, only 35.5% of brokered files showed correct calculations to the borrower.

To help newer brokers, we asked FSRA for details on:

(A) how to calculate APRs correctly, and
(B) how to better meet the disclosure obligations that it'll be auditing brokers on in 2026.

Here's what they told us...

(All bolding below is MLN's for the purpose of flagging key points.)

On whether brokers are breaking usury laws

• FSRA says: At the time of review, some brokers' 6-month terms entailed borrowing costs that could be excessive under current law. However, "FSRA’s review of Annual Percentage Rate (APR) disclosures centred on mortgage files that were brokered before the federal changes took effect and those legislative changes are not retroactive."

On APR calculation

• FSRA says: "Most brokerages already use internal systems/software or third-party calculators" to determine APRs (which must be based on the below formula). "FSRA does not provide an online calculator."

On whether estimated charges used in APR calcs must be labelled as "estimated"

• FSRA says: "Yes. Brokerages must clearly identify to consumers in writing when estimates are used in the calculation of the cost of borrowing. Estimates should be provided if the exact information cannot be known when making the disclosure. All estimates must be based on reasonable assumptions."

On what common charges must not be included in APR calculations

• FSRA says: "Some of the charges that must not be captured include: land transfer tax, legal fees for lawyers hired by and paid for by the borrower, land registration/discharge fees, borrower-paid insurance for which the borrower is the beneficiary (e.g., optional borrower’s title insurance policy), late payment fees/overdraft charges, default interest, and mortgage default insurance premiums."

On APRs for standard big bank mortgages

• FSRA says: "In most bank mortgage deals arranged through a broker, the disclosed APR will be the same as the contract rate or slightly higher to account for the appraisal. However, additional costs may get included in the APR when:
  • A lender-required appraisal fee is charged to the borrower and does not meet the exclusion conditions
  • A lender admin/setup fee or other mandatory fee is charged to the borrower, or
  • A brokerage fee is collected directly from the borrower."

On compensation disclosure differences for institutional non-prime lenders vs. MICs/private lenders

• FSRA says: "Brokers are always required to disclose when and how they are being paid. If a broker is being paid by a private lender or Mortgage Investment Corporation (MIC) out of the lender fee, the fact that the broker is being paid by the lender must still be disclosed, regardless of what type of lender it is. The same disclosure applies to mortgages provided by institutional lenders. The reason why borrowers may see the exact compensation paid out by private lenders or MICs is not because it’s a requirement under MBLAA, but because of how these entities choose to pay brokers. Lawyers representing private lenders/MICs commonly send the brokerage fee directly to brokers from the proceeds of the loan. In these cases, borrowers sign a “Letter of Direction” authorizing the lawyer to release the funds. The letter of direction includes the specific amount brokers are paid."

On suitability and exit strategies for private mortgages

• FSRA says: "Our goal is to correct practices when they are inadequate. In addition to administrative monetary penalties, we can address instances of non-compliance through additional tools we have at our disposal, including additional supervisory actions (like formal corrective action notices and additional reporting requirements), and placing licence conditions on individuals and/or brokerages. We may also suspend and revoke licences as appropriate, which could have a significant financial impact on those we sanction ... Recent actions involving mortgage suitability include:  
  • Example 1
  • Example 2
    ​ ​ ​

On documenting suitability and exit strategies

• FSRA says: "Brokerages need to 'show their work,' outlining the specific reasons why a mortgage recommendation was made ... An appropriate level of documentation should allow a third party who wasn’t involved in the transaction to be able to understand why the recommendation was suitable for the particular consumer and, in the case of a private mortgage, why lower cost financing was not accessible. A broker should be able to show, in writing:
  • Why a private mortgage is needed now
    • This can include a brief summary of the consumer’s situation, including credit score, income type/level, recent life events, time pressures, etc. (credit issues, income type/level, recent life events, time sensitivity, etc.)
  • The exit strategy
    • Ensure the borrower is aware that they need a strategy to enable them to move back to a traditional or lower-cost mortgage (rely on seasonal self-employed income, reduce debt, stabilize income, etc.)
  • Affordability and sustainability
    • Details including income and debt calculations, property value assumptions, sensitivity to higher rates and fees, and how the borrower can carry the private mortgage
  • Disclosure and client acknowledgement
    • It’s recommended that brokerages have a borrower acknowledge with a signature that they have received and understood disclosures, noting that private mortgages are typically higher-cost, short-term solutions, that the consumer has been informed about the key risks, any real or perceived conflicts of interest for the brokerage, broker or agent, and have discussed the need to have an exit strategy to obtain more affordable financing in the future.

In our examinations, FSRA looks for documentation that would allow a reasonable third party to clearly understand the reasons why the mortgage was considered suitable, that the consumer was made aware that they need an exit strategy, and whether the consumer was informed about any real or perceived conflicts of interest and the risks of the mortgage."

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On how FSRA will conduct audits

• FSRA says: FSRA exams are a critical industry compliance “pulse check” that helps identify areas of improvement to ensure consumers are getting appropriate mortgage advice. They are not random, but risk-based—to focus on brokerages that present a higher risk to consumers. In 2025-26, FSRA will continue to look at private mortgage transactions and large brokerages. We will also be expanding our focus to mid-to-large-sized brokerages that have grown very quickly to ensure that the appropriate internal controls and supervision have kept pace with that growth. Other factors that determine which brokerages are chosen for an examination may include:
  • Size and market impact
  • Business model (e.g., private lending volume)
  • Previous exam or supervisory findings that raise concerns
  • Information from Annual Information Returns
  • Complaints and trends

The number of exams we conduct will depend on what we find in the initial stages of the exam program and the steps that may be required to fully address any potential risks to consumers.

Ontario broker/agent headcounts

Markets were rattled on Wednesday after ADP employment data revealed a more serious contraction in U.S. jobs than anticipated.

The surprisingly soft data made next week's Fed cut even more likely. And while Canada’s own chance of a December trim remains somewhere between slim and never, heightened expectations of U.S. easing still tend to tug our yields lower.

Yields steadied after Monday's spike following the Bank of Japan's hawkish messaging. While a Fed rate cut is largely baked in, Canadian markets are now looking to Friday's domestic jobs data to cinch expectations that the BoC will hold.

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The Bank of Japan jolted Canada's bond market on Monday. The BOJ hinted it could tighten rates later this month, driving yields noticeably higher.
​ ​ ​
Closer to home, U.S. and Canadian manufacturing keep easing off the throttle. But that did little to stop yields' rocket launch on Monday.

Friday's big news was that Canada's economy appears to be coming back to life, with StatCan reporting surprisingly strong Q3 growth. But a peek under the hood reveals we're still not yet firing on all cylinders.

In MLN's grand finale with Andrew Gilmour, SVP of Residential at CMLS, he dives into:

• A powerful new product that CMLS is working on
• Instant rate holds
• The potential evolution of extended rate holds
• Non-federally regulated funding sources
• What happens to brokers who commit mortgage fraud
• "Fair" prepayment penalties
• Monoline lender economics

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