A mortgage brokerage offers a standard mortgage product to a client in Ontario and includes a clause in its service agreement that states: 'The brokerage reserves the right to adjust administrative fees retroactively up to 30 days after the mortgage commitment is issued, provided the client is notified in writing.' Which of the following best describes the legality of such a clause under current Ontario mortgage regulations?

Question: A mortgage brokerage offers a standard mortgage product to a client in Ontario and includes a clause in its service agreement that states: 'The brokerage reserves the right to adjust administrative fees retroactively up to 30 days after the mortgage commitment is issued, provided the client is notified in writing.' Which of the following best describes the legality of such a clause under current Ontario mortgage regulations?

Answer options: ✅ It is generally unenforceable, as the MBLAA and its regulations require clear, upfront disclosure of all fees and charges to the borrower before commitment.

• It is permissible, provided the client acknowledges and explicitly consents to the possibility of retroactive adjustments during the application process.
• It is only permissible if the retroactive adjustment is directly tied to unforeseen increases in third-party costs, such as appraisal fees.
• It is legal if the client has a cooling-off period after receiving notification of the adjustment to withdraw from the agreement without penalty.

Correct answer: It is generally unenforceable, as the MBLAA and its regulations require clear, upfront disclosure of all fees and charges to the borrower before commitment.

Explanation: The Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA) and its regulations emphasize transparency and consumer protection. All fees and charges must be clearly disclosed to the borrower before they enter into a mortgage commitment, making retroactive adjustments, even with notification, generally unenforceable as they contravene the spirit of upfront disclosure and informed consent.