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.
Issue link: http://digital.canadawide.com/i/795783
Who Can You Trust? letters to the editor update W hen investors are dealing with professionals, they inherently trust them. How many people, when they're getting a mortgage on their house, ask their lawyer to go through the documents page by page with them? How many people, when they buy a condominium, ask their lawyer to explain the declaration and bylaws to them? e documents are many pages long and are written in legalese, so they are beyond the comprehension of the average person. e buyer relies on their lawyer's overview of the key points of the contract and then signs them as instructed. e same would also apply to any other complicated document, such as a franchise agreement or a shareholder's agreement. When people go to their accountant to do their tax return, the accountant does not go through the return line by line, but instead tells the client what the important items are and how much tax is owed. e client then signs the return. Beyond complex agreements such as purchase and sale, how many people read through and understand their car purchase or lease agreement, which also involves a large sum of money? How many read through and understand their life, health and disability insurance policies, car rental agreements or credit card agreements? People rely on those providing a product or service to explain the main points and [trust] them to be telling the truth. We have been socialized not to read these legal contracts and just sign them. e Financial Services Commission of Ontario (FSCO), the regulator for mortgages (as well as insurance, trust companies, credit unions, pensions, etc.), requires a mortgage brokerage to provide its FSCO licensed number in its public relations and advertising materials, which includes its website. One of the effects of this requirement is that a large portion of the public believes that these professionals can be trusted like other professionals such as lawyers, doctors and accountants, as they, too, are regulated. Further, since this number and [proof] of being licensed by FSCO must be displayed, it reinforces this idea for a lot of people. Why don't the other professions have to provide this "marketing and promotional" information? e promoters of this syndicated mortgage product know this, so when the investors are given confirmation of lender's interest; loan agreement; syndicated mortgage investment and indemnity agreement; solicitor's certificate and undertaking regarding syndicated mortgage; authorization form 9D; a Law Society of Upper Canada form; lender acknowledgement; Olympia Trust forms; and FSCO form 1 and form 1.1 for development mortgages and other documents, the promoters know that most people will not read them or have the ability to understand them. e promoters do tell investors to get independent legal advice, which only enhances trust in the promoter because the investor views this as transparency. e promoters know that independent legal advice for this type of investment is costly, so as a "benefit" they offer to provide "free" independent legal advice. e investor is now led to believe – at least in his own mind – that a lawyer will provide proper, impartial legal advice, and would include any letters CMBA MEMBERS' VIEWS 12 | winter 2017 cmba-achc.ca CMB MAGAZINE