Mortgage Broker

CmB magazIne cmba-achc.ca spring 2018 | 27 r egulatory change engulfing syndicated mortgages is clearly ramping up in Ontario. Changes slated to take effect on July 1 include splitting mortgage syndications into two classifications: complex syndications (which will be referred to as non-qualified SMIs) and simple syndications (which will be referred to as qualified SMIs). Qualified SMIs are basically the traditional syndicated mortgages that we are familiar with. ese will include mortgages with a loan-to-value ratio of 90 per cent or less, with the land value based on the current use and not any contingent future development of the land. e property must be primarily residential (one commercial unit permitted) which contains no more than four units (see www.fsco 188/08). ese changes adopt a similar model utilized in British Columbia since 2000, which was implemented following a syndicated mortgage scandal involving Eron Mortgage. e issues, regulatory action, civil suits and criminal proceedings related to Eron unfolded in a remarkably similar way to that of Fortress and its related parties in Ontario. e most striking regulatory change is a new $60,000 limit on non-qualified SMIs over a 12-month period for investors or lenders who are not part of the "designated" class of investors or lenders. Other changes impacting non-qualified SMIs include new disclosure and suitability review forms. ese new regulations are only directed at mortgage brokers in Ontario. However, there is a fairly large portion of the mortgage-arranging industry that does not have to follow these rules, as they are exempt from governance by FSCO. Some Ontario industry members have observed that lawyers appear to arrange many syndicated mortgages, and have expressed concern that new tightened syndicated mortgage rules may have limited, if any, impact as lawyers are exempt from being licensed by FSCO under the Ontario mortgage broker licensing statute (MBLAA). An upcoming review of MBLAA could provide a good opportunity to explore these concerns. In particular, this review could consider answers to the following questions: n Will Ontario lawyers be subject to the revised investor disclosure forms that are going to be mandatory for Ontario brokers dealing in non-qualified SMIs, or will they continue to have no accountability to FSCO? n Will Ontario lawyers continue to be able to deal in mortgages without meeting any of the educational (re-licensing) courses that mortgage brokers and agents must take every two years? n Of what value are the AIRs if a portion of the marketplace is not providing mortgage- lending and -arranging information? ere is clearly a dearth of data on the volume of syndications arranged by lawyers, meaning that AIRs likely provide faulty data on mortgage-lending practices. n Where do Ontario lawyers who deal in mortgages learn how to: l read and analyze an appraisal; l read and analyze a credit report; l be aware of fraud risk in mortgaging; and l verify client suitability? e MBLAA review is expected to get underway in the fall. We will keep readers posted on this issue. A hArD Act to follow a forthcoming review of Ontario's Mortgage Brokerages, Lenders and administrators act 2006 could tackle some questions about mortgage-dealing activity performed by lawyers regulationreview

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