A brokerage, 'Secure Mortgages Inc.', receives a client's deposit of $5,000 for a mortgage application. The transaction falls through before funding. According to trust account rules, how must Secure Mortgages Inc. handle this deposit?

Question: A brokerage, 'Secure Mortgages Inc.', receives a client's deposit of $5,000 for a mortgage application. The transaction falls through before funding. According to trust account rules, how must Secure Mortgages Inc. handle this deposit?

Answer options: ✅ The $5,000 must be deposited into a designated trust account and returned to the client from that trust account.

• The $5,000 can be deposited into the brokerage's operating account, and then a cheque for the same amount issued back to the client.
• The brokerage can hold onto the $5,000 for up to 30 days in case the client decides to reapply.
• A $200 administrative fee can automatically be deducted before returning the remaining $4,800.

Correct answer: The $5,000 must be deposited into a designated trust account and returned to the client from that trust account.

Explanation: All client funds, including application deposits, must be held in a designated trust account separate from the brokerage's operating funds. When the transaction fails, these funds must be returned to the client from the trust account in accordance with provincial Mortgage Brokerages, Lenders and Administrators Acts regulations.