Defining a Mortgage Broker

There seems to be some confusion in the industry about how mortgage industry professionals can refer to themselves in advertising. Recently, some authorized mortgage industry professionals have approached the Real Estate Council of Alberta (RECA) and have expressed their belief that they cannot refer to themselves as mortgage brokers because their class of licence is “mortgage associate.”

Did you know that the Real Estate Act defines “mortgage broker” as:

• A person who on behalf of another person for consideration or other compensation
• Solicits a person to borrow or lend money to be secured by a mortgage,
• Negotiates a mortgage transaction,
• Collects mortgage payments and otherwise administers mortgages, or
• Buys, sells or exchanges mortgages or offers to do so,
• Or A person who holds out that the person is a person referred to above.

The fact is, anyone who is authorized under the Real Estate Act as a mortgage broker can refer to themselves as – and use the term mortgage broker – in their advertising.

An associate or broker, whether it is in real estate or mortgage, is simply a class of licence that is defined in the Real Estate Act Rules. More than anything, the term mortgage associate indicates that the individual is not responsible for the operation of a brokerage and all that entails, but rather is an associate working within and registered to a brokerage. All mortgage associates are, in fact, mortgage brokers in that they broker mortgages – even though their class of licence may say associate.

On the other side of the equation are those individuals who may, for example, be employed by a bank or other financial institution, who assist consumers in getting mortgages. While they may be involved in soliciting a person to borrow or lend money and/or may negotiate mortgage transactions (among other things) – if they are not authorized by RECA pursuant to the Real Estate Act as a mortgage broker, they cannot refer to themselves as mortgage brokers. If they advertise themselves as a mortgage broker, or otherwise hold themselves out as such, they could find themselves in breach of section 17 of the Act.