A mortgage broker, Sarah, is arranging a private mortgage for a borrower, Mr. Henderson, a self-employed individual in Ottawa with a challenging credit history. The lender for this private mortgage is a Mortgage Investment Corporation (MIC) in which Sarah's spouse holds a significant ownership stake. What is Sarah's primary obligation regarding this situation?

Question: A mortgage broker, Sarah, is arranging a private mortgage for a borrower, Mr. Henderson, a self-employed individual in Ottawa with a challenging credit history. The lender for this private mortgage is a Mortgage Investment Corporation (MIC) in which Sarah's spouse holds a significant ownership stake. What is Sarah's primary obligation regarding this situation?

Answer options: ✅ Sarah must disclose her spouse's ownership in the MIC to Mr. Henderson in writing and obtain his acknowledgment before proceeding.

• Sarah is prohibited from arranging this mortgage due to an inherent conflict of interest.
• Sarah should advise Mr. Henderson that she will receive a higher commission from this specific MIC.
• Sarah must ensure the interest rate offered by the MIC is competitive with conventional bank rates, despite Mr. Henderson's credit.

Correct answer: Sarah must disclose her spouse's ownership in the MIC to Mr. Henderson in writing and obtain his acknowledgment before proceeding.

Explanation: Mortgage brokers have a duty to disclose any real or potential conflicts of interest to their clients. This includes interests held by close family members in lending entities, ensuring the client provides informed consent. This is a core principle under provincial mortgage broker legislation and ethics guidelines.