From: Jim Sicotte | Polaris Mortgage Planners | 780-719-6888 | Jim@PolarisMortgagePlanners.ca 

Hi Larry,

This week in mortgages:

- Bond market still steady at the moment.

- “Cash Back” clauses.

5 YEAR RATES (not including low rate specials with restrictions):

Fixed insured 3.99 (-0.05 decrease)

Variable insured 3.65 

Fixed conventional 4.39 

Variable conventional 3.90 

Rentals Fixed 4.59 (-0.05 decrease)

Rentals Variable 4.29 (+0.05 increase)

LENDER TURNAROUND TIMES:

2-3 business days for a Conditional Mortgage Commitment, and similar for any back and forth of documents.

NEWS PIECE or TIDBIT:

The BC Financial Services Authority (BCFSA) has issued an advisory warning to both real estate licensees and mortgage brokers about the serious risks associated with “cash back” clauses in real estate transactions. While this is a warning from BCFSA it is pertinent information for agents in all jurisdictions.

These arrangements are increasingly being flagged by regulators and they carry significant fraud and money laundering concerns.

What Is a “Cash Back” Clause?

A cash back clause is an arrangement where a Buyer pays an inflated purchase price, and the Seller returns a portion of the price to the buyer in cash once the deal closes, often documented outside the Contract of Purchase and Sale. When these arrangements are not disclosed to the lender they impact the true value and risk of the deal.

Why This Is a Problem?

1. High Risk of Mortgage Fraud

Cash back arrangements misrepresent the true purchase price. This can affect the loan-to-value ratio, potentially leading a lender to approve a mortgage they otherwise wouldn’t. Failing to disclose this is considered fraudulent.

2. Money Laundering Concerns

These clauses can be used to disguise the source or movement of funds. Agents must file a Suspicious Transaction Report (STR) with FINTRAC if such activity is suspected.

3. Significant Regulatory Consequences

Knowingly participating in or facilitating a cash back scheme may result in:

Disciplinary action, Loss of license, Damage to the brokerage and industry’s reputation.

My Responsibilities as a Mortgage Agent. 

I must:

Never participate in, encourage, or assist with a cash back arrangement. Ensure clients fully disclose any such discussions or side agreements. Advise clients that lenders treat cash back arrangements as a reduction in purchase price, resulting in lower approval amounts. Encourage clients to obtain independent legal advice if this type of arrangement is raised. Report suspicious activity to the Brokerage and FINTRAC immediately. Contact police if there is potential criminal activity.

If a Client Mentions a Cash Back Idea here’s what you should do:

Stop the conversation and do NOT provide guidance on structuring such arrangements. Advise the client this arrangement must be disclosed to the lender. Notify your Broker. Document the interaction in your notes. Submit an STR if you believe there is intent to hide, mislead, or circumvent lending/anti-money laundering rules.

On a less serious note, have a great week! :)

For any clarifications or if you have any other questions on financing, let me know and we'll get the answers for you. 

BUYING SELLING INVESTING 

You're #1 goal is our #1 goal 

Larry Kennedy 

RE/MAX Real Estate Central 

587-930-9704 (Direct) 

LarryKennedy@remax.net

LarryKennedy.RemaxRealEstateEdmonton.com

#200, 10835 124 St NW

Edmonton AB T5M 0H4