CHAPTER 1
Mortgage Investment Corporation (MIC)- corporation that enables small investors to invest
in a diversified pool of mortgages on residential real estate with the benefit of using the
corporate form by purchasing shares in the corporation
Mortgage Backed Securities (MBS)- investment in a pool of amortized residential mortgages
insured through CMHC under the National Housing Act (NHA)
FSRA- regulatory body that oversees the mortgage brokerage industry and enforces the
MBLAA, other industries and acts
Private Lenders- individual investor with funds who would like to invest in mortgages
Institutional Lender- Bank, Loan or Trust Company, Credit Union
Collateral Mort- promissory note with a lien on the property for the total amount.
Enduring POA- legal document in which a person gives someone else the authority or right to
make decisions about their finances
Title Insurance- against errors in title such as survey errors, zoning infractions & property
encroachments (also fraud)
CHAPTER 2
Mortgage Purpose- Buy, Refinance, ETO, Bridge Financing
Standard Charge Terms- terms and conditions of the mortgage contract, including the
remedies available to the lender upon default by the borrower
Borrower Covenant- repay loan, insure & maintain property, no waste, pay taxes, follow
Standard Charge Terms
Lenders Covenant- cert of discharge, assignment of mortgage, provide quite possession.
CHAPTER 3
Partially amortized- term involved
Blended Payment- combination of principal and interest
Constant Payment- payment doesn’t change throughout the term (value of interest/principal can
change)
Home Equity Line of Credit- (HELOC)
PA, BC payment Mort FR- Fixed interest rate, same periodic payment made up of a combo of interest
and principal throughout the term. (Pro: Security)(Con: Potential Lack of Savings)
PA, BC payment Mort VR- Variable interest rate that changes whenever the lender’s prime rate
changes, same periodic payment made up of a fluctuating combo of interest and principal throughout
the term. (Pros: Savings, Ability to Switch to FR)(Cons: Volatility, Negative Amortization(interest rises),
Payment Increase)
PA, BV payment Mort VR- Variable interest rate and a fluctuating periodic payment that both change
whenever the lender’s prime rate changes, payment is fluctuating combo of interest and principal
throughout the term. (Pros: Savings, Maintain Amortization)(Cons: Volatility, Payment Fluctuation)
The Interest Only Mort- term and a constant mortgage payment consisting of only interest payable for
the payment period. At the end of the term, the principal amount is repayable (Pro: Cash Flow)(Cons:
Increase Debt, Reduced Equity)
Reverse Mort- interest accruing mortgage (usually over 55yrs). The mortgage is usually only repayable
upon the death of the surviving homeowner or sale of the property (Pro: Cash Flow, Repayment)(Con:
Reduced Equity)
Straight Line Principal Reduction Mort- equal payments of principal are made throughout the term in
addition to the interest payable for that period (Pro: Cash Flow)(Con: High Initial Payment Size)
Graduated Payment Mort- payments are initially small but grow over time (Pro: Cash Flow)(Con:
Principal Risk)
Open Mort- A mortgage that allows the borrower to repay the entire principal balance or portion
thereof without penalty (fully open mortgage) or with an interest rate differential or 3 month’s interest
penalty (partially open mortgage)
CHAPTER 4
Encumbrance- An interest in property that has the effect of limiting the rights of fee simple ownership
of real property. Typical encumbrances are mortgages, easements and restrictive covenants.
Easement- rights acquired for benefit of real property, runs with land.
Restrictive Covenants- restriction placed on land, runs with land.
Building scheme- group of restrictive covenants registered against several properties in a development
plan
Joint tenancy- co-ownership property, undivided interest (spouses)
Tenancy in common- co-ownership property, individual shares (business partners)
CHAPTER 5
MBLAA- Mortgage Brokerages, Lenders and Administrator Act.
MBLAA Regulates in ON- dealing/trading in mort, carrying on business as a lender, carrying on the
business of administrating mort.
FSRA- Financial Services Commission of Ontario
FSRA issues 4 licenses- Brokerage, Mort Broker, Mort Agent, Mort Administrator
FSRA can issue/refuse to issue license, impose/amend conditions on a license, renew/refuse to renew a
license, suspend/revoke license
Penalties- MBLAA gives FSRA 2 types of enforcement tools: Admin Penalties, Charges Under the
Legislation.
Admin Penalties (Max Pen)- Brokerage/Admin $25,000, Broker or Agent $10,000, Anyone else not
licensed $25,000
Charges- Individuals fined up to $100,000 and imprisonment for up 1 year, Corporations fine up to
$200,000
Licensed Mort Agent- 18yrs, resident of Canada, mailing add in Ont that isn’t PO box, be authorized by a
brokerage, completed approved course within 2 years before they apply for license.
Remuneration- total compensation that is received in exchange for the service that has been provided
CHAPTER 6
Lender Expectations- Provide borrowers who are suitable for the lender, Provide appropriate protection
against fraud, Facilitate the transactions to its successful completion.
Borrower Expectations- Act in the borrower’s best interests, Completely analyze the borrower’s needs,
Make appropriate recommendations based on borrower’s needs, Facilitate the transaction to its
successful completion.
6.3
CHAPTER 7
Mort Default Insurance- compensates the lender for losses suffered. Charged to Lender but then is
typically passed to Borrower.
Reamortization- increase the amortization.
Capitalization- This procedure allows the lender to add the amount of arrears to the loan amount.
Mort Creditor Insurance (2 types)- Life insurance given to borrower by institutional lender(Bank). Life
insurance through 3rd party
Encroachment- when a piece of real property hangs from one property over the property line of
another’s.
Disbursement- amounts payable. In mortgage financing, disbursements typically relate to amounts paid
from the mortgage proceeds.
Title Insurance- protection against errors in title such as survey errors, zoning infractions (municipal
work orders/permits), property encroachment, fraud.
Property Insurance- protection for home against fire and other damage.
Liability Insurance- protection from having to pay damages to people, if the owner has been found
responsible for unintentionally injuring them or damaging their property.
Lender’s Mortgage Creditor Insurance- is obtained by the borrower from the lender, usually in the
branch of the lender when they apply for the mortgage. This type of policy is very convenient for the
borrower to obtain and the insurance premium is usually included in the mortgage payment, making it
virtually invisible to the borrower. Payments can be made to lender in something happens to
borrower(insured person).
CHAPTER 9
PR Materials- Ex. Business cards, Ads, Website, and MUST include Brokerage Name, Brokerage License
Number, Agent/Broker Name as registered with FSRA, Agent/Broker title.
Canadian Code of Advertising Standards- created in 1963 to promote the professional practice of
advertising its updated by ASC.
ASC (Advertising Standards Canada) 1957- regulates the advertising industry and handles consumer
complaints related to advertising.
CHAPTER 11
Documentation for Transactions- Employment Verification- Employee (T4, Pay Stubs, NOA, Letter of
Employment, Tax Return) Self Employed (Financial Statements, Business License/Cheque). PIPEDA
Consent. Photo ID. Divorce/Separation Agreement. Child Support Order/Agreement.
Documentation for a Purchase- Purchase and Sale Agreement. MLS Listing. Proof of Down Payment.
Rental Letter. Real Estate Salesperson Info.
Documentation for Refinance, ETO, Switch- Current Mort Statement. Charge/Mort. Transfer/Deed.
Property Tax Statement. Property Insurance Policy. Mort Repayment History (if applicable)
CHAPTER 14
RPTD- Date item was reported to Equifax.
OPND- Date account was opened with credit grantor.
H/C- High credit; the highest amount owed or credit limit.
TRMS- Monthly repayment amount.
BAL- Balance owing
PDA- Past due amount
RT- Type of account & manner of repayment; R = Revolving, I = Installment, O = Open, M = Mortgage
and C = Line of Credit
30/60/90- Number of times subject has been 30, 60 or 90 days past due with this account.
MR- Months Reviewed - the number of times or months this account has reported.
DLA- Date Last Activity
0- new; approved but not used.
1- pays in 30 days; 1 past due max.
2- pays in 30-60 days; 2 pass due max
3- pays in 60-90 days; 3 past due max.
4- pays in 90-120 days, 4 past due max.
5- 120 days or more overdue but is not “9“.
7- Making regular payments under a consolidation order or similar arrangement.
8- Repossession (voluntary or involuntary).
9- Bad debt; placed for collection; skip.
Credit Score: 35% Payment Hist, 30% Utilization, 15% Hist, 10% New credit, 10% Credit Mix
CHAPTER 15
Purpose of Appraisal- Insurable Value. Property Taxes. Investment Value. Selling Price. Future
Price (pre constructions). Expropriation Value (). Market Value to decide on loan amount.
AIC (Appraisal Institute of Can)- provides designation AACI and CRA.
AAIC, P .App (Accredited Appraiser Can Institute, Professional Appraiser)- qualified to
valuate/consulting services on all types of properties. Degree & completed AACI program.
CRA (Can Residential Appraiser)- qualified to valuate/consulting services for individual,
underdeveloped residential dwelling sites. Degree & completed AACI program.
CNAREA- Can National Association of Real Estate Appraisers
CMAR (Cert Mort Appraisal Reviewer)- qualified to review residential appraisal report which
might be used for mort. Min 2yrs of mort profession & CNAREA program.
CRA (Cert Appraisal Reviewer)- qualified to review any appraisal report. Must hold other
designation & have 5 years experience & complete CNAREA program.
REIC- Real Estate Institute of Can
FRI (Fellow of the Real Estate Institute)- Can’s most senior designation for real estate sales
professional.
Approaches for Property Value 3- Income Approach: calculates value of income producing
properties. Cost Approach: calculates value of property based on cost of replacing it, less
depreciation. Direct Comparison Approach: compare 3 similar properties and add/subtract
value depending on characteristics(bedroom, appliances).
AVM (Automated Valuation Models)- computer program that uses public record data on
residential properties to calculate the market value.
Types of Appraisal 3- Desktop: uses MLS reports. Drive-By: same as Desktop but also includes
inspection of exterior and provides detail about neighbourhood. Full Appraisal: expands on the
other approaches, gives inspection of inside and around property.
CHAPTER 16
BDM/BDO- Business Development Manager/Business Development Officer: Reps of lender
tasked with getting business from mort agents.
Rate Drop- decreasing rate after they’ve been approved but before transaction is closed.
Rate Hold- maintaining rate for specific period of time, after approval but before transaction is
closed
Stated Income- must meet TDS ratio. Doesn’t have to prove income
Full Doc- can provide documentation to prove/verify their income
BFS- Business For Self
O/O- Owner Occupied Property
SFD- Single Family Dwelling
CHAPTER 17
Application to Institutional- Application & Credit Report. Mort agent must review the following
areas and provide underwriter with explanatory notes (if needed). Credit, Property,
Employment
Application to Private- Application, Credit Report, Investor/Lender Disclosure and any
supporting Documents. Higher duty of care. Requires more Info/Recommendation.
Investor/Lender Disclosure- must be given to Private Lenders, required by MBLAA, failure to do
so is an offence (individuals: fine up to $500,000 & 1 yr prison. corporation: fine up to
$1,000,000). Brokerage can’t accept funds from lender unless its for a specific mort.
Investor/Lender Disclosure- must disclose: terms and condition of proposed mort, borrower
info, property info, fees and payment associated with mort, role of brokerage, nature of
relationship b/w brokerage/borrower/3rd party, potential conflict of interest, risks associated.
Disclosure Includes- a completed disclosure form in a for approved by FSRA, signed by broker.
Commitment Letter- sent by lender to mort agent after approval. It explains terms and
conditions of mortgage, and conditions that must be met before the lender will fund the mort.
Info in Commitment Letter- Applicant Name, Address, Mort Amount, Interest Rate, Payment
Amount, Payment Frequency, Term, Closing Date, Prepayment Privileges, Conditions of
Approval, Terms of the Approved Mort (fees, appraisal requirements, etc)
Funding Ratio- Submitted applications compared to number of funded application.