SOR/2010-6820103

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20196

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BANK ACTCOOPERATIVE CREDIT ASSOCIATIONS ACTINSURANCE COMPANIES ACTTRUST AND LOAN COMPANIES ACTMortgage Insurance Business (Banks, Authorized Foreign Banks, Trust and Loan Companies, Retail Associations, Canadian Insurance Companies and Canadian Societies) RegulationsP.C.2010-38820103

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Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, hereby makes the annexed Mortgage Insurance Business (Banks, Authorized Foreign Banks, Trust and Loan Companies, Retail Associations, Canadian Insurance Companies and Canadian Societies) Regulations pursuant to(a) subsections 418.1(2)a and 552(2)b of the Bank Actc;aS.C. 2009, c. 2, s. 270bS.C. 2009, c. 2, s. 273cS.C. 1991, c. 46(b) subsection 382.2(2)d of the Cooperative Credit Associations Acte;dS.C. 2009, c. 2, s. 277eS.C. 1991, c. 48(c) subsections 469.1(2)f and 542.061(2)g of the Insurance Companies Acth; andfS.C. 2009, c. 2, s. 283gS.C. 2009, c. 2, s. 285hS.C. 1991, c. 47(d) subsection 418.1(2)i of the Trust and Loan Companies Actj.iS.C. 2009, c. 2, s. 290jS.C. 1991, c. 45Interpretation

1The following definitions apply in these Regulations.institution means any of the following:(a)a bank, as defined in section 2 of the Bank Act;(b)an authorized foreign bank, as defined in section 2 of the Bank Act;(c)a retail association, as defined in section 2 of the Cooperative Credit Associations Act;(d)a company, as defined in subsection 2(1) of the Insurance Companies Act;(e)a society, as defined in subsection 2(1) of the Insurance Companies Act;(f)a company, as defined in section 2 of the Trust and Loan Companies Act. (institution)insurer includes a government agency that provides mortgage insurance to an institution. (assureur)mortgage insurance means an insurance policy or a guarantee against default on a residential mortgage. (assurance hypothécaire)residential mortgage means a loan made in Canada on the security of residential property that has four or less residential units. (hypothèque résidentielle)SOR/2016-142, s. 5(F)

Application

2These Regulations do not apply in respect of an institution that has obtained mortgage insurance from an insurer if neither the institution nor any of its affiliates charges borrowers an amount for that insurance.

Determination of Actual Cost

3(1)For the purposes of sections 418.1 and 552 of the Bank Act, section 382.2 of the Cooperative Credit Associations Act, sections 469.1 and 542.061 of the Insurance Companies Act and section 418.1 of the Trust and Loan Companies Act, the actual cost to an institution shall be determined by deducting from the cost incurred by the institution for mortgage insurance provided to the institution by an insurer all payments or benefits, including rebates or discounts, that are received directly or indirectly by the institution from the insurer, whether in the form of a fee or commission or in any other form.(2)For the purpose of the determination referred to in subsection (1), the following payments or benefits are not to be considered part of the actual cost:(a)any payment or benefit that is not related to the provision of mortgage insurance to the institution by the insurer;(b)any payment or benefit received by the institution for an activity permitted by section 4; and(c)any payment received by the institution from the insurer in respect of a claim made by the institution under the mortgage insurance as a result of a default on the residential mortgage that is the subject of the insurance.

Permitted Activities

4(1)An institution may enter into an arrangement with an insurer that provides the institution with mortgage insurance to receive payments or benefits from the insurer for the products and services that are offered by the institution to its customers and to the public in the normal course of business, if the institution undertakes that arrangement on market terms and conditions.(2)An institution may enter into an arrangement with an insurer that provides the institution with mortgage insurance to receive payments or benefits from the insurer for anything other than a product or service referred to in subsection (1), if the institution undertakes that arrangement on terms and conditions that might reasonably be expected to apply in a similar transaction in an open market under conditions requisite to a fair transaction between parties who are at arm’s length and who are acting prudently, knowledgeably and willingly, and the arrangement(a)is necessary for the provision of that insurance; and(b)does not involve a payment or benefit in respect of any of the activities referred to in paragraph 5(a).

Prohibited Activities

5An institution may not(a)enter into an arrangement to accept directly or indirectly from an insurer that provides mortgage insurance to the institution, or from any of the insurer’s affiliates, any payment or benefit in respect of marketing or advertising or any promotional activities carried out by the institution, the insurer or any other person;(b)permit any of its employees or representatives to accept directly or indirectly from an insurer referred to in paragraph (a), or from any of the insurer’s affiliates, a payment or benefit referred to in that paragraph; or(c)permit any affiliate that it controls, or any employees or representatives of that affiliate, to enter into an arrangement to accept a payment or benefit referred to in paragraph (a) directly or indirectly from an insurer or from any of the insurer’s affiliates that provides mortgage insurance to the institution.

Coming into Force

6These Regulations come into force on July 1, 2010.