REMIC is in the process of developing the new private mortgage course for all mortgage agents and brokers who wish to broker private mortgages in Ontario. This course, once approved by the Financial Services Regulatory Authority (FSRA) of Ontario, will be available in early 2023.
What is a private mortgage?
A private mortgage is a mortgage that is advanced by a non-institutional lender. Non-institutional lenders consist of virtually anyone or anything that is not considered to be an institutional lender. While there is no specific minimum size to be considered one, an institutional lender is typically considered to be a bank, trust company, credit union, insurance company, finance company or other large institution that lends directly to consumers or invests in mortgages by purchasing pools of mortgages or otherwise investing in bulk groups of mortgages through securitization, mortgage-backed securities, etc.
The most common form of private mortgage can be characterized as a scenario in which one individual (the industry refers to this person as the “lender”) lends money to another individual (the industry refers to this person as the “borrower”) using the borrower’s real property (“real property” is a legal term that means all land and everything affixed to it), such as their home, as collateral or security for that loan.
From the perspective of the private lender, the mortgage represents an investment. The private lender invests a specific amount of money by lending it to the borrower and in return receives a contractual rate of return in the form of interest payments.
From the perspective of the borrower, the mortgage is a loan that must be repaid, the same as if it was provided by a bank. The closing process is similar to that of an institutional mortgage transaction as well. A lawyer is required, just like when getting a mortgage from a bank, and the steps he takes are virtually identical to that of an institutional transaction.
Top reasons for using a private mortgage
While there are several reasons for using a private mortgage, here are five of the top reasons. Market conditions change over time, so these reasons are not meant to be a definitive list, or in order of most to least popular. However, they highlight why private mortgages are useful for many borrowers.
- Accessing equity
- Debt consolidation
- Bridge financing
- Time constraints
In the new private mortgage course participants will learn about:
- understanding their role in the private lending segment
- being aware of the participants in the private mortgages market and the legal and regulatory requirements that apply to private lenders
- having an expert understanding of: (1) the steps in a mortgage transaction; and (2) how to implement them
- applying processes/steps to ensure private mortgage transactions in compliance with licensee obligations to the borrower
- applying processes/steps to ensure private mortgage transactions in compliance with licensee obligations to the lender/investor
- conducting private mortgage transactions in compliance with licensee obligations to the borrower and the lender/investor, not giving preference to either
- describing the processes related to administering a mortgage
- analyzing private mortgage transactions to identify and prevent fraud
- evaluating conduct in private mortgage transactions to determine if it is ethical
Want to learn about mortgage brokering? Click here to view the learning outcomes of our mortgage course for licensing of mortgage agents.
New licensing classes to broker private mortgages
In April 2022, the government and FSRA implemented new licensing classes with enhanced educational requirements for brokers and agents working with private mortgage lenders and raising capital.
This initiative supports the Ontario government’s direction to introduce licensing categories that better respond to the unique practices required by certain segments of the mortgage market, and enhance competency in the mortgage brokering sector to better protect consumers.
Mortgage brokers, including principal brokers, and agents who wish to deal in private lending should take note of the following key dates:
- April 1, 2023: new licensing classes come into effect
- Early 2023 – Private Mortgages Course and Challenge Exam available
- October 31, 2023 – deadline to pass the Private Mortgages Course Challenge Exam
- March 31, 2024 – deadline to complete the Private Mortgages Course
See New Licensing and Education Requirements to Better Protect Consumers for more on what will change and what this means for you.
This new course will be ideal for those wishing to invest in mortgages, and will be required for agents and brokers who wish to broker mortgages. Look for more updates as they become available!
Joe White, President