The Ontario law that regulates mortgage brokers hasn't been updated in about 35 years, but that's about to change. On Tuesday, the provincial government announced legislation that will "improve consumer protection, enhance and modernize regulation and encourage greater competition and choice for consumers," the government says.

Brokers command about 25 per cent of the mortgage market in Canada, which is estimated to be worth about $700 billion a year.

The government says that since the early 1970s, many new mortgage products and services have appeared on the market. The updated Mortgage Brokers, Lenders and Administrators Act would require businesses and individuals who deal in mortgages to be licensed by the Financial Services Commission of Ontario. Brokerages will be required to designate a principal broker who will oversee the organization and act as the "chief compliance officer."

The proposed act sets out the qualifications required to act as a mortgage broker or agent, including insurance provisions, as well as new disclosure rules.

The act would also remove restrictions for foreign ownership, and establish four types of licenses. Only those who are licensed would be able to use the terms mortgage broker, mortgage agent or mortgage administrator. New standards of practice are to be prescribed by the regulations.

Failures to comply with the proposed act could result in administrative fines of up to $25,000 for mortgage administrators and up to $10,000 for brokers or agents. Upon conviction for a criminal offence under the new act, the penalty for individuals would be up to $100,000 or a year in jail, and the penalty for corporations would be $200,000.

Financial institutions are exempt from the new act, says the government, "because they are already highly regulated and have substantial consumer protection measures in place. The employees of financial institutions are also exempt from being licensed as mortgage brokers or agents, so long as they are acting on behalf of their employers."

Lawyers are exempted from the requirement to be licensed, but the government says these regulations still must be worked out before the legislation is finalized.

"The old act was outdated with respect to today's marketplace and consumers' needs," says Shayam Kaushal, president of the Independent Mortgage Broker's Association of Ontario. "The new legislation will better recognize the role played by brokers and agents and the value-added services that they provide to homeowners and business people."

The Canadian Institute of Mortgage Brokers and Lenders is also welcoming the legislation. It announced last fall that all members of the organization would be required to earn a professional accreditation, in an effort to increase the development of educational and ethical standards.

While changes to the act have been discussed for many years, an increase in mortgage fraud cases in recent years has given new urgency to the legislation.

On the same day that Ontario introduced its proposals, First Canadian Title said the average case of real estate fraud now costs $300,000. In comparison, the company says, the average credit card fraud case averages about $1,200, according to the RCMP.

"Falling victim to real estate title fraud can mean you are suddenly faced with the possibility of losing the single-biggest investment of your life," says Wayne Proctor, a director with First Canadian Title, in a news release. "While still devastating, other forms of fraud pale in comparison."

The company says that in 2000, real estate title fraud claims accounted for only six per cent of the total claims paid by the company, but that by 2005, the number hit 33 per cent.

"Last year alone, our underwriting department prevented approximately $19 million in what we believe to be fraud claims," says Susan Leslie, vice-president with First Canadian Title.

Proctor says that real estate agents should watch for tell-tale signs of fraud when dealing with a real estate purchase or refinance transaction. They include:

• Inquiries and established credit are inconsistent with age, income or profession

• A counter cheque is presented for deposit or identification instead of a personal cheque

• Instructions that funds be paid to an unrelated third party individual

• Employment information provided cannot be verified

• Clients will only provide a cell phone number for contact purposes.