Mortgage Broker

2:46 PM legalease CmB magazine cmba-achc.ca spring 2017 | 27 n e broker had negotiated the original transaction; the lender never had any direct communication with the borrowers. n e lender had indicated on the registered mortgage that the appropriate way to contact him was care of the broker's office address. (If this was meant to simply be a mailing address for the lender and not the giving of authority to the broker, the lender was responsible for making the limitation clear to third parties. At most, the limitation was vague.) n If the broker's authority did not extend to providing mortgage payout statements or to receiving the payout funds, it was up to the lender to prove that any limitations on the broker's authority were conveyed to third parties. The broker likely had actual authority to provide payout statements: n e lender knew the broker was providing payout statements; the broker had sent a payout statement to the lender for signature and the lender did not indicate he was exceeding his authority. e lender did nothing to stop him or to advise third parties that the broker was exceeding his authority. n No limitations on the broker's authority were conveyed to the borrowers, the trust company's lawyer or the trust company. e lender enabled the broker to continue to provide these third parties with payout documents consistently with his apparent authority respecting administration of the mortgage, without alerting these third parties to any limitation on the broker's authority. In the circumstances, the broker had actual authority to issue payout statements but at the very least had ostensible authority to do so. Authority as to Content of Payout Statement If the broker had authority to issue payout statements, he must also have had authority to decide what would go into them; otherwise the authority to issue the payout statement is meaningless. Ordinarily, a party who has requested and received a payout statement is entitled to take it at face value. Unless there is clearly an irregularity, the mortgage lender will be bound by the statement. ere was nothing to cause the trust company to question whether the balance was $75,000 or something else. It had no way of knowing what dealings there had been with the mortgage aer it was registered, whether principal had been paid down, whether the disposition of the second property had generated net proceeds, and so forth. e borrowers had never seen the first payout statement prepared by the broker, which contemplated personal approval by the lender. Further, there was nothing to cause any of the third parties to question why the broker was asking that the funds be paid to the brokerage, and clearly no reason for anyone to think that the broker was going to abscond with the lender's money. e broker had, aer all, been involved with the mortgage from its inception, and he was listed on the mortgage as the representative of the lender. e mortgage expressly provided that funds were to be paid at the broker's office. In this case, the actual or ostensible authority to issue a payout statement properly includes authority to provide in the statement where and how the payment is to be made. ird parties are not required to conduct an audit of the broker's business before they can rely on dealings with him. It is irrelevant whether the broker was complying with mortgage brokering regulatory requirements. Absent something that would put them on notice, third parties dealing with a mortgage broker are entitled to assume that the mortgage broker is operating his business as required by law. Likewise, the fact that many prudent lawyers might insist on a mortgage discharge statement being signed by the actual mortgagee is not conclusive. e trust company's lawyer asked for and received the discharge statement from the person mentioned on the face of the mortgage. In the absence of some compelling evidence that there is something wrong with the discharge statement, the trust company's lawyer was entitled to take it at face value. e trust company's lawyer was not the borrowers' lawyer, and owed no duty in law to him. Conclusion In conclusion, the lender has been defrauded by the broker, the agent he chose. e other parties relied on the broker's actual or ostensible authority, and dealt with the mortgage and payments under it in good faith. Having given the broker authority, or having held him out as possessing authority, the lender is to bear the loss resulting from the broker's dishonesty. Takeaways Be careful to whom you give actual authority to be your agent. Be aware of circumstances that might cause others to think you have given a person ostensible authority. If you are giving someone authority to be your agent, clearly convey to others the limitations of that authority. Monitor the activities of anyone you make your agent; do not blindly trust them. Having given the broker authority, or having held him out as possessing authority, the lender is to bear the loss resulting from the broker's dishonesty.

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