Lately in the news we have seen several articles on major mortgage fraud happening in different parts of the country. Many of these cases involved unregulated mortgages and they are the source of most of the complaints to the governing bodies in each province. Consumer education on the different types of mortgage lenders is very hard to find as is who you should complain to about a possible fraudulent situation.

First off, the only unregulated lending of money for mortgages is when a private individual lends their own money for the purpose of funding a mortgage on a property. There is no governing body on this transaction other than common law and the individual is at risk on both sides and should have at the very least have independent legal advice (ILA). If the borrower defaults – the lender forecloses. If there are other disputes between them, then it becomes a civil matter.

Mortgage Investment Corporations (MIC) are pools of money that are governed by securities commissions in most provinces and are under stringent guidelines when it comes to where and whose money they can lend and how much of an individual’s money can be lent. Rules of disclosure and accountability are monitored by the regulator or securities commission and of course by the investors whom they report to on a yearly basis.

Syndicated mortgages is a situation where two or more investor pool their money to invest in one property. Syndicated mortgages are registered on title with all of the investors named on them, unlike a MIC which would just be the MIC on title. These are heavily monitored and regulated by the securities commission as you need a securities license to deal in syndicated mortgages as an investment tool. This also falls under the guidelines that you must be a sophisticated investor to lend your money in this fashion.

Monoline lenders are lenders who deal just in mortgages, they source their business through the mortgage broker industry and buy and sell their mortgages to the banks. Although heavily regulated by the Office of the Superintendent of Financial Institutions (OSFI), they are sometimes considered “shadow banking” even though they fall under the same guidelines as the banks.

Mortgage Brokers act in many different ways to help facilitate mortgages. First and foremost they act in three ways.

• One they can act as an intermediary meaning they take your information and find a lender that meets your needs in this case it is up to you to decide if that mortgage is best for you.
• Secondly they can act as your representative and then they must act in your best interest and find you the best deal for your situation.
• Third if they are dealing with private individuals to lend their money they then have to disclose that they are representing that lender and you as a consumer need to seek outside advice. This is all governed by the real estate act in each province and either the securities commission or the real estate councils.

Banks of course are governed by the bank act and OSFI and their books are audited on a regular basis to ensure they have enough money to lend from taking in your monthly deposits and savings.

So I’m not sure who is unregulated because as far as I can see mortgages are regulated up the wazoo and the only unregulated scenario is when the lender is a private individual lending their own money to an individual. So when all is said and done, if you need more advice on mortgages, contact the mortgage professionals at Dominion Lending Centres.