Ms. Chen is applying for a mortgage through a broker. The broker recommends Lender X, which offers Ms. Chen a 5-year fixed rate mortgage at 5.00% compounded semi-annually. The broker will receive a 1.25% commission on the loan amount from Lender X. This commission is standard for similar products from Lender X. What, if anything, must the broker disclose to Ms. Chen regarding their compensation?

Question: Ms. Chen is applying for a mortgage through a broker. The broker recommends Lender X, which offers Ms. Chen a 5-year fixed rate mortgage at 5.00% compounded semi-annually. The broker will receive a 1.25% commission on the loan amount from Lender X. This commission is standard for similar products from Lender X. What, if anything, must the broker disclose to Ms. Chen regarding their compensation?

Answer options: ✅ The broker must disclose the nature and amount of all compensation they expect to receive from Lender X in relation to Ms. Chen's mortgage.

• Only the fact that they receive compensation, but not the specific amount, is required.
• No disclosure is needed as the commission is paid by the lender and not directly by Ms. Chen.
• Disclosure is only required if the commission exceeds 2.00% of the loan amount.

Correct answer: The broker must disclose the nature and amount of all compensation they expect to receive from Lender X in relation to Ms. Chen's mortgage.

Explanation: Mortgage brokers/agents must disclose all material information, including the nature and amount of compensation they will receive from a lender, to ensure the client is fully informed of any potential conflicts of interest or influences on the recommendation, according to provincial disclosure requirements (e.g., O. Reg. 187/08, s. 31(2)(d)).