Mortgage Broker

CMB MAGAZINE cmba-achc.ca winter 2016 | 45 predatorylending Brokering BAD MORTGAGE BROKERS SOMETIMES refer to "predatory lending." Have you ever wondered what predatory lending looks like? A recent Ontario Superintendent of Financial Services case provides a number of real-life examples. What is predatory lending? — Predatory lending practices are deceptive, coercive, exploitative or unscrupulous actions by a lender. ey result in a borrower becoming subject to oppressive, unfair or abusive mortgage terms. e mortgage is one the borrower doesn't need, doesn't want or can't afford. Note that most licensing statutes prohibit brokers, in addition to lenders, from being party to such transactions; albeit sometimes using other terms such as harsh, unconscionable or otherwise inequitable transactions. A case of serial predatory lending — e Financial Services Commission of Ontario (FSCO) recently uncovered what appears to be serial predatory lending by a licensed broker. e broker had a pattern of manipulating and exploiting individuals in dire financial situations. e suspension order provides five examples of the broker's predatory conduct. In each example, the broker met potential clients who had few financial options. e broker offered financing. e broker misled and deceived clients by registering mortgages without the clients' knowledge or consent, without ensuring the clients understood the terms, or for amounts greater than the clients had agreed. e lenders were oen undisclosed family relations of the broker. When the borrowers were unable to maintain payments, the mortgages were enforced and the borrowers were forced from their homes. e broker filed affidavits in some of the court proceedings, identifying himself as "agent for the Plaintiff." In most cases, the broker or a close family relation of his ended up with possession of the homes and/or title to the properties. If aer court proceedings there was a remaining balance owing on the mortgage, the borrowers' salaries were sometimes garnished. A specific but typical example from the suspension order — A couple had been served with a Notice to Vacate their property. ey were desperate. e broker arranged refinancing and, based on discussions and information provided by the broker, the couple believed they were entering into a new first mortgage that would pay out the two existing mortgages on their house and permit a manageable monthly payment. Without the approval of the couple, the broker registered a second and third mortgage; one in the name of the broker's nephew and the other in the name of the nephew's company. e broker's relationship with the nephew was not disclosed to the couple. It appears no monies were advanced under the two mortgages. e nephew ultimately foreclosed and forced the couple from their home. Further, the couple's income was garnished as the foreclosure process had not satisfied the balance owing under the mortgages. The regulatory outcome — e broker's conduct has caused the Superintendent to, amongst other things, consider whether the broker is suitable for continued licensing. e Superintendent said that the pattern of conduct exhibited by the broker affords reasonable grounds that he will not deal or trade in accordance with the law and with integrity and honesty. e Superintendent accordingly suspended the licences of both the broker and his brokerage (of which he is the principal broker and operating mind). Each has been given notice by the Superintendent proposing to revoke their respective licence. Hearings regarding the proposed revocations have yet to be held. A behind-the-schemes look at a predatory lender BY RAY BASI

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