Mortgage Broker

Summer 2019

Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.

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22 | SUMMER 2019 CMB MAGAZINE registered. However, this simple explanation, while tempting and believed by some lenders, is erroneous. Unlike mortgages, a registered CPL does not create an interest in the land against which it was registered. Rather, a CPL is merely notice to the world of a potential action that claims an interest against the registered property, and does not create any substantive rights. In Ryan Mortgage Income Fund Inc. v. Revesz, 2015 BCSC 1734, the Court explained the nature of a CPL priority. In this case, the petitioner was granted two mortgages by the mortgagor for the principal amounts of $25,000 and $58,000. e mortgagor paid off the first mortgage of $25,000 and the petitioner erroneously discharged the second mortgage of $58,000. Before the petitioner could re-register the second mortgage, the respondent, Craig Tostenson Enterprises Ltd., registered a CPL on the property. e Court quoted Bank of Nova Scotia v. Titanich, 2014 BCSC 1129, and stated that a CPL does not have a proven interest in land. Section 31 of the Land Title Act does not create or affirm a priority, but rather reserves a priority spot against other registered charges. e CPL holder can claim that priority aer a judgement or order establishes that CPL. As such, the CPL in Ryan Mortgage maintained a position in priority over the re-registered mortgage. PRACTICAL TAKEAWAY: I emphasize the language of both the Land Title Act and the Courts. A CPL can claim priority, but a CPL does not have priority. The distinct nature of a CPL merely granting a claim in priority, in contrast to other more common registered charges that grant a priority as governed by the Land Title Act, explains why a CPL "priority" cannot be changed from a priority agreement. D. UNCONSCIONABLE MORTGAGES I cannot stress enough the importance of being cognizant of avoiding assisting with or receiving instructions that could be deemed to be unconscionable transactions. Please take note that section 9(2) of the British Columbia Business Practices and Consumer Protection Act provides that where it is alleged that a mortgage transaction is unconscionable, the burden of proof that the transaction was not unconscionable is on the lender. Section 8 of the Business Practices and Consumer Protection Act obliges a court to consider all the surrounding circumstances of a mortgage transaction where the lender knew or ought to have known: [ 1 ] whether the lender subjected the borrower or guarantor to undue pressure to enter into the transaction; [ 2 ] whether the lender took advantage of the borrower or guarantor's inability or incapacity to reasonably protect his or her own interest because of the borrower or guarantor's physical or mental infirmity, ignorance, illiteracy, age or inability to understand the transaction; [ 3 ] whether at the time the transaction was entered into, the cost of the transaction grossly exceeded the cost to like borrowers; [ 4 ] whether at the time the transaction was entered into, there was no reasonable probability of repayment; [ 5 ] whether the terms were so harsh or adverse to the borrower as to be inequitable. PRACTICAL TAKEAWAY: Record in writing the facts in situations where you are dealing with a mortgage transaction that has harsh or unusual terms or higher than usual interest rates or fees. It is always best to send the borrower out for independent legal advice and you should also specifically warn your lender client that the transaction may later be set aside or varied. Note that you may not be privy to all the surrounding circumstances even if your client is so aware. In Bank of Montreal v. Jamieson, 2011 BCSC 1141, the Court considered the appeal of an order nisi granted to the Bank of Montreal due to the evidence not being "manifestly clear" that there was no defence of unconscionability that deserved to be tried. e Court determined that: Here, the evidence of the appellants' lack of financial acumen, their negative net worth, the manner of their solicitation and offer of the cash back mortgage, in circumstances where they went to the Safeway to buy groceries and le with a pre-approved mortgage for $150,000, raises the question of whether the loan transaction was unconscionable. And: Accordingly, the issue of whether the mortgage is void for unconscionability by reason of the manner and circumstances in which it was solicited is referred to the trial list. at triable issue also includes the question of whether, in the circumstances of this case, the bank had any obligation to insist or require that the appellants obtain independent legal advice from a solicitor and whether the bank breached that obligation. PRACTICAL TAKEAWAY: Do not just recommend independent legal advice on certain occasions. Insist on it as often as you can. Consider the position of the borrower(s) and the how they were solicited by your lender client. Be prudent and aware of unusual forms of solicitation, such as a lender persuading a borrower to grant a mortgage, even if the borrower ultimately signed the mortgage documents. PRACTICAL TAKEAWAY: Always be careful of the context surrounding refinancing deals. Terms agreed to between the lender and borrower not within the registered charge may delay and give rise to a bona fide triable issue in a foreclosure proceeding. Ask your lender client for the context and any additional agreements surrounding the mortgage transaction. e law evolves. And as such, so must your professional procedures and practices. e above article is meant to summarize certain general issues surrounding mortgages but the author advises that the article is not a substitute for legal advice on a specific lending transaction. Each such transaction has its own particulars and you should seek appropriate professional and legal advice on each loan transaction. newcaselaw You should seek appropriate professional and legal advice on each loan transaction

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