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features 11
HOW TO POSITION AND PITCH FOR PRIVATE DEALS Recognizing the four groups of private mortgage clients
18
NEW TITLE PROTECTION FOR FINANCIAL PLANNERS AND ADVISORS IN ONTARIO It will be vital to implement this new title protection regime with efficiency and transparency BY MICHAEL BUROKAS
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SUPREME COURT RULING ON HYPOTHEC EXPIRY DATE This case in brief, TD Bank V. Young, illustrates a decision from the bench
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departments 8
Editorial summary
30 Advertisers Index
columns 14 Off the Clock: Laura Martin is a passionate promoter of diversity and inclusion in the Canadian mortgage industry BY LISA GORDON
WORDS TO LIVE BY Inam Qureshi is steadily growing his own company through patience, persistence and perseverance BY LISA GORDON
22 Legal Ease: Too Much of a Good Thing? Advancing funds beyond the face value of a mortgage BY RAY BASI
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VOLUME 5 ISSUE 4 FALL 2020
One of the fastest growing alternative lenders in Canada Ranked No.179 on Canada’s Top 400 Growing Companies by The Globe and Mail
THE CANADIAN MORTGAGE BROKERS ASSOCIATION DIRECTORS:
Sylvain Poirier (CMBA-Quebec), Kim McKenney (CMBA-Ontario), Meg O’Leary (CMBA-Atlantic), Troy Resvick (CMBA-BC) EXECUTIVE DIRECTORS:
Samantha Gale and Petra Keller CMBA - ONTARIO INDEPENDENT MORTGAGE BROKERS ASSOCIATION OF ONTARIO 7 - 40 Winges Road, Woodbridge, ON L4L 6B2
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www.gentaicapital.com info@gentaicapital.com Tel: 604-396-9866 Toll-Free: 1-855-982-6699
CMBA - ATLANTIC MORTGAGE BROKERS ASSOCIATION OF ATLANTIC CANADA 12 M - 7095 Chebucto Road, Halifax, NS B3L 0A1
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SPECIALISTS IN INNOVATIVE MORTGAGE SOLUTIONS
CANADIAN MORTGAGE BROKER magazine is produced by the Canadian Mortgage Brokers Association (CMBA) EDITOR: Samantha Gale STAFF WRITERS: Samantha Gale, Ray Basi MANAGING EDITOR: Kathleen Freimond ART DIRECTOR: Scott Laing CONTRIBUTORS: Ray Basi, Michael Burokas,
Samantha Gale, Lisa Gordon IMAGES: Adobe Stock, iStock, Inam Qureshi,
Cory Van Ieperen BILLING: Debra Hiller CANADIAN MORTGAGE BROKER © All rights reserved. The views expressed in CANADIAN MORTGAGE BROKER are those of the respective contributors and are not necessarily those of the publisher or staff. Publications mail agreement 41297283. Please return undeliverable Canadian addresses to 902-777 Broadway W Vancouver, BC V5Z 4J7 Printed in Canada by Transcontinental Publishing.
Web: mandatemortgage.com Email: info@mandatemortgage.com Phone: 604-731-2899
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editorialsummary
WEALTH AND TAXES COVID-19 has wreaked havoc on the economy and the current trend of governments creating new taxes – and increasing current taxes – is a likely scenario BY SAMANTHA GALE
I
n the last issue of Canadian Mortgage Broker magazine, we wrote about reports that Canada Mortgage and Housing Corporation (CMHC) is funding research on how to deploy a new federal home equity tax. Most mortgage industry persons might already be aware that CMHC has since denounced such reports and advises that neither it nor the federal government have any agenda to implement such a tax. Nevertheless, debate over the likelihood and exact nature of a home equity tax ensued. Dr. Jack Mintz, from the University of Calgary, opined that a home equity tax is not the same as a capital gains tax – it is a broader tax on imputed rents. Taxes on imputed rents are not popular
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but do exist in a number of European countries. Imputed rent is an estimate of the rent that an owner-occupied property would potentially earn if it were tenanted and generating rental income. In theory, imputed rents on property are considered to add to a homeowner’s disposable income as they do not pay rent. However, most other commentators assumed that a home equity tax simply meant a capital gains tax on owner-occupied homes. Now a recent statement from the 2020 throne speech that the government “will also look for ways to generate revenue by taxing extreme wealth inequity” promises to keep the speculation and debate over wealth and asset taxes alive for the foreseeable short term. There is, as of yet, no clear sign
that taxing principal residences is off the table. Tim Cestnick of The Globe and Mail suggests that “if there’s one thing the current government has shown, it’s a propensity to tax those who have financial means – real or perceived. And there is, perhaps, no store of value greater than the homes of Canadians.” Weighing in on the subject of wealth taxes is Peter Cross in an October 2020 report issued by the Fraser Institute. Cross provides a detailed statistical analysis that demonstrates that wealth inequality is actually not increasing in Canada, despite the common belief to the contrary. In fact, Cross demonstrates that younger generations lead in wealth gains over both Generation Xers and baby boomers. “The wealth of baby boomers rose by 64.6 per cent between 2010 and
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editorialsummary
2019, while for Generation X it increased 133.9 per cent and Millennials posted a 465.5 per cent gain.” We might also acknowledge that wealth is generally accumulated through the inevitable aging process of property owners and not economic factors. Older people simply have more years under their belt to build wealth through price inflation, including rising property values on real estate. What results from the deployment of asset taxes, imputed rent taxes or capital gains taxes might be readily perceived as a punishment on the elderly – many of whom have been diligently building a nest egg for retirement, instead of spending frivolously on consumables, vacations and non-appreciating assets. For those who were counting on dipping into their home equity to supplement their retirement years, new housing taxes can drastically alter these retirement plans. Such taxes then become more of an old age tax than a wealth tax. Inequality scholar and world economist Branko Milanovic reminds us that, for the most part, society tolerated wealth accumulation because under our “social contract,” capitalists “used most of their surplus income to invest rather than to consume.”
Some economists have predicted that the government will be unable to balance the federal budget for at least 30 years or so. How we pay back our current COVID-19 expenditures will surely be a matter of hot debate in the coming months and years.
What message is conveyed by government when hard-earned assets, such as housing, are subject to taxation, while consumptive spending on travel, dining out, clothes, jewellery, cars and the like are not? The message delivered here would be to spend away on lifestyle choices rather than to make deliberate expenditures on long-term objectives, such as retirement planning. Another common myth is that most of our wealth is held by corporations and not individuals, and that asset taxes would therefore target those big, deep-pocket, profit-driven businesses, which deserve to foot more of the tax bill. However, a review of Statistics Canada reports reveals that the vast majority of wealth actually sits in individual hands. Take 2019 for instance – individual household net worth totalled a whopping $11,876 billion while corporations only possessed $622 billion. People therefore currently hold 19 times more net assets over corporations. While it is true that some corporations are shockingly wealthy, most corporations pay out most of their earnings on salaries and stock options. This accounts for the fragility of many businesses during challenging economic times, such as those which may have experienced an economic freefall during the current COVID-19 pandemic. There is no question that COVID-19 has wreaked havoc on the economy as well as federal government finances. Some economists have predicted that the government will be unable to balance the federal budget for at least 30 years or so. How we pay back our current COVID-19 expenditures will surely be a matter of hot debate in the coming months and years. The current trend of governments creating new taxes and increasing current taxes is a likely scenario in our future. However, we should be mindful that our tax system reflects our societal values and judgments about who benefits from and who pays for public programming and expenditures. In making this determination, we need to avoid knee-jerk solutions, based on dubious assumptions, that might even be popular, and ensure that tax policy is sound and based on well-researched facts, numbers and strategies. CMB MAGAZINE
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privatelenders
HOW TO POSITION AND PITCH FOR PRIVATE DEALS Recognizing the four groups of private mortgage clients
T
he massive growth in demand for private mortgages – 924 per cent between 2007 and 2018 according to Statistics Canada – means many Canadian mortgage brokers are now asking how they can improve their sales effectiveness when it comes to private deals as they add them in to their portfolios. Canadian Mortgages Inc. (CMI) has been specializing in private mortgages since 2005 and has learned much over the past 15 years that it would like to share with industry colleagues who want to know how best to approach the private mortgage market.
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Brokers already know the importance of tailoring sales pitches to the unique needs of individual clients; the same applies potential private mortgage clients who tend to fall into one of four groups:
1
The “credit-challenged” borrower
When assessing risk and determining a client’s ability to repay a mortgage, lender guidelines rely disproportionately on the borrower’s credit score. This ensures that borrowers with low credit scores are
almost certain to be denied financing for a traditional mortgage, making creditchallenged borrowers prime candidates for private mortgages. It is important to remember that credit-challenged clients are not just those with a history of bad credit. For example, young homebuyers also fall under this category because despite having a high income they lack a credit history, which disqualifies them from traditional financing. With credit-challenged borrowers, it is important to be 100 per cent transparent: a private loan is most likely the only way for CMB MAGAZINE
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privatelenders
them to qualify for a loan and fulfill their dream of owning a home. Help the borrower understand that, due to their low credit score, they are considered high-risk, and therefore will not meet the restrictive requirements of federally regulated banks and credit unions. Explain that private lenders are not federally regulated and are exempt from the stringent rules governing banks and credit unions. Highlight the fact that this regulatory freedom enables private lenders to finance deals that are conventionally considered high-risk, which means a credit-challenged borrower’s score will not hurt their chances of being approved for a private loan.
to their particular requirements. Accordingly, brokers should outline how the regulatory freedom afforded to private lenders enables them to underwrite a highly flexible mortgage tailored to the unique circumstance of each individual.
3
The “untraditionally employed” borrower
You have probably experienced first-hand the increasing number of self-employed, seasonally employed or gig-economy workers who do not qualify for traditional loans due to non-traditional, unverifiable or irregular sources of income.
With increasingly stringent lending guidelines, it is no longer just the credit challenged who are ineligible for traditional financing. Conventional lenders are unwilling to finance unconventional deals that do not fit neatly into their rigid lending guidelines. You might also want to remind the credit-challenged borrower that a private mortgage is an opportunity to improve their credit, enabling them to demonstrate a positive repayment history and expedite improvement of their score.
2
The “unconventional” borrower
With increasingly stringent lending guidelines, it is no longer just the credit challenged who are ineligible for traditional financing. Conventional lenders are unwilling to finance unconventional deals that do not fit neatly into their rigid lending guidelines. These unconventional borrowers include those who wish to finance unique properties, purchase a property under construction, or carry out a large-scale renovation. This category also includes borrowers who require short-term loans that banks are typically unwilling to finance. Above all, unconventional borrowers require flexibility and tailored solutions suited
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For the untraditionally employed, the main challenge is all the red tape surrounding the due diligence processes of traditional vendors. The mortgage underwriting process for traditional lenders is tedious, time-consuming and tiring. It requires credit checks, background checks and approvals, as well as endless paperwork. Untraditionally employed borrowers often lack the documentation required by traditional lenders. Therefore, brokers should focus on the ease of the application process. Highlight that private lenders typically do not ask for extensive or extraneous documentation. For example, at CMI, our straightforward deal-submission guidelines request only the information strictly required to make an informed lending decision.
4
The “time-sensitive” borrower
The majority of private mortgage leads will fall into one of the above three categories. Borrowers turn to private mortgages because they have difficulties applying for or being approved for a traditional mortgage. However, a fast-growing number of Canadians are turning to private mortgages as their preferred mortgage solution simply due to the quickness and convenience of the qualification process. These time-sensitive borrowers include real estate investors or house flippers. They often require funds in a matter of days in order to close a competitive bid and do not have the time to undergo the due diligence required by traditional lenders. Private lenders are able to offer faster and more flexible financing, with times for approval, loan processing and fund release significantly shortened, in some cases to a single day. Most importantly, simple and straightforward deal-submission guidelines cut out the red tape, making the process easy on both brokers and their clients. When selling a private mortgage, never underestimate the power of speed and convenience. Consider the situation from the perspective of the aspiring homeowner: they have found their ideal home and are ready to close the deal and secure their dream.
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brokersoff-the-clock This interview with Laura Martin continues our series BROKERS OFF THE CLOCK. In every issue, we ask a mortgage broker to tell us what they like to do when they’re not behind a desk. Would you like to be profiled in a future edition – or suggest a fellow mortgage broker? Contact info@cmba-achc.ca
DIVERSITY
CHAMPION
Matrix Mortgage Global’s Laura Martin is a passionate promoter of diversity and inclusion in the Canadian mortgage industry BY LISA GORDON
“I
f you want to be seen as a thought leader, you first need to build your audience and do your homework.” Laura Martin has been in the mortgage business since age 20, and she’s definitely been doing her homework. As the chief operating officer of Matrix Mortgage Global in Toronto and the secretary of CMBA Ontario, Martin has learned a few important lessons over the past 13 years. But many of those realizations didn’t hit home until she went back to school, studying psychology and cognitive science while earning her Honours Bachelor of Science at the University of Toronto. Martin returned to the mortgage business in 2015 with a whole new appreciation for how to get the job done. “Business is fundamentally about people,” she says. “In my early 20s, I was kind of losing touch with this. I felt all I was doing was chasing paperwork.” Martin, now 33, tried to start her own mortgage brokerage right before returning to school, but admits she “really didn’t have it figured out when it came to running a business.”
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While she earned her degree, Martin also worked on building her personal resilience and emotional intelligence. She said going to school made her far more interested in working on the business, as opposed to working in the business. “I am much more focused on marketing and branding and operations,” she said. “I like problem solving and I’m focused on business development, but I’m also concerned with social change.” While Martin said women represent slightly more than half of mortgage professionals, she is still concerned because they are overlooked and under-represented at high-profile industry events, such as broker panels. So, when she’s not doing mortgage deals, Martin has made it her personal goal to effect change. “The need for diversity inclusion in the mortgage industry is great,” she said. “As of late, this is something I’ve been pretty focused on. It’s been about thought leadership and propelling women and minorities to the forefront. We’re not going to grow as an industry unless we hire and promote women. I think I can make the biggest impact
brokersoff-the-clock
in the industry and make companies more profitable and productive through promoting these sorts of things.” Martin took decisive action after attending a Christmas party last year, where out of 300 people in the room, she was one of about 15 women and two visible minorities. “I realized something needs to change fundamentally here,” she said. “I made a
in an effort to make diversity commonplace. An avid reader, she consumes at least 50 pages of non-fiction every day and puts a premium on physical fitness by biking and rollerblading daily. Martin volunteers at the Story Book Farm Primate Sanctuary in Sunderland, Ont., and mentors at-risk youth. She teaches them to be “unabashedly” themselves and to practise
“The need for diversity inclusion in the mortgage industry is great.... As of late, this is something I’ve been pretty focused on. It’s been about thought leadership and propelling women and minorities to the forefront. video with a quarter million views – it went viral. I wrote a script and made a video – I said, ‘Hey this isn’t the ’50s. The frat boy culture needs to go.’” Martin also participates in the Brokers Playbook webcast, where she aims to deliver thought leadership from a female perspective. “I am promoting the concept of personal branding, so you’re creating a resilience around your business,” she explained. “When you’re bold enough to say something, build your following and keep plugging away at it, you have a fan base that backs you up. It’s a feedback cycle where you’re providing them with education, information and value, by being vocal and demanding the microphone and a seat at the table.” The webcast is Martin’s way of giving back to the mortgage industry,
self-awareness, a concept she says is critical to success in the mortgage industry. “Ask yourself, ‘What are you good at?’ You really need to assess what you can do better than 90 per cent of people. Then you only do that thing and let go of the rest. I train my team, work on education and research, develop strategic partnerships. By me focusing on thought leadership and strategic partnerships, business just comes.” Time management and marketing skills are also crucial, especially in the first five years of business, added Martin. “It’s important to communicate your message and the solutions you can offer on a regular basis – speak to people’s problems and needs. Get your face and name out there and exist beyond your company.” Most importantly, Martin is following her passion by speaking out in support of diversity and inclusion in the mortgage industry. With 120 employees at several Matrix Mortgage Global locations in Toronto, Halifax, Edmonton and Vancouver, she’s appreciative of the support her work receives from company management. “People are imprisoned by their own minds as to what is unacceptable,” she concluded. “People must speak out against it when they see it. It’s time to put the hammer down in terms of workplace policies.”
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titleprotection
NEW TITLE PROTECTION FOR FINANCIAL PLANNERS AND ADVISORS IN ONTARIO It will be vital to implement this new title protection regime with efficiency and transparency BY MICHAEL BUROKAS, J.D.
A
s part of its 2019 budget, the Ontario government passed the Financial Professionals Title Protection Act, 2019 (FPTPA), creating a title protection regime for individuals who call themselves a financial planner or financial advisor in Ontario. Under the FPTPA, individuals are prohibited from calling themselves a financial planner or advisor, an abbreviation of such, an equivalent in another language, or any title that could reasonably be confused with one, unless they obtain a credential from an 18
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approved credentialing body. This regime is administered and overseen by the Financial Services Regulatory Authority of Ontario (FSRA), which approves both organizations as a credentialing body and the credentials they offer. The FPTPA will come into force on a day to be named by proclamation. The financial services industry includes a wide variety of professionals with varying degrees of credentials who could conceivably attribute the broad title of financial planner or financial advisor to themselves. This reality raises concerns that
consumers could be misled into poor advice by unqualified/underqualified individuals who use these titles. Such circumstances reduce public confidence in financial services professionals and competition between them. Ontario’s new title protection framework is designed to ensure individuals who hold out to be a financial planner or financial advisor have at least a baseline level of credentials to ensure public confidence and protection, without unnecessarily increasing the regulatory burden on professionals.
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titleprotection
This new framework does not create a new regulator for financial services professionals. Such professionals will continue to be regulated by their relevant regulatory bodies in Ontario. The framework is exclusively centred on meeting minimum standards before using these titles. The criteria for becoming a credentialing body capable of issuing credentials to individuals, and the criteria for the credentials themselves (allowing title usage), are determined by FSRA’s internal rules. FSRA has proposed rules and invited interested written submissions by November 12, 2020. Other than establishing and enforcing ethical, professional and educational standards, the proposed rules require a credentialing body to demonstrate to FSRA that it has the necessary expertise, resources and procedures to effectively administer a credentialing program and oversee the conduct of individuals holding the credentials it has issued. The FPTPA will empower FSRA to inquire and conduct examinations of credentialing bodies (either approved or otherwise) to ensure compliance with that Act, FSRA’s Rules or their conditions of their approval. At this time, it is not known who these credentialing bodies will be. To obtain a credential enabling the usage of the financial planner or financial advisor title, the proposed rules require a credentialing body to ensure the individual will act competently, professionally, fairly, honestly and in good faith. Such individual will need to pass an examination of their technical knowledge and competencies “reasonably expected of an individual providing financial planning or advising (as the case may be).” Tested knowledge and competencies will relate to: n The Canadian financial services marketplace and regulatory environment; n Estate planning, tax planning, retirement planning, investment planning (for planners); n Ethical practices and professional conduct; n Dealing with conflicts of interest; n Collecting personal and financial information; n Identifying client objectives, needs and priorities; and n Providing suitable financial and investment recommendations (or planning) to a client.
The proposed rules also require credentialing bodies to have continuing education requirements to ensure ongoing knowledge and competency. Many of the actual details regarding this regime will be left to the credentialing bodies’ own requirements. The FPTPA empowers FSRA to issue compliance cease and desist orders to individuals who use the protected titles without a credential. The public will be able to look up non-compliant individuals on FSRA’s website. It is anticipated that the FPTPA will come into force once the FSRA rules are finalized. Under the proposed rules, individuals in Ontario who used the title Financial Planner or Financial Advisor, an abbreviation of such, an equivalent in another language, or any title that could
from a designated entity. The FPTPA is a significant step towards protecting these broad titles. Its success in Canada’s most populated province will undoubtedly push a trend toward title protection in other Canadian jurisdictions. Despite aspirations from FSRA to limit regulatory burdens on regulated individuals, it will be interesting to see how such individuals – who already have onerous competency, ethical and educational requirements with their regulator – will respond to yet more requirements just to use titles they have used for years. There is a risk that affected individuals will view this new title protection regime as a redundant nuisance, unnecessary to “weed out” a few incompetent actors better dealt with by other means. Considering the success of any regulatory regime depends on widespread
Considering the implications of financial planning on individuals, their confidence in the planning and advising of their financial affairs ought to be as grounded as the confidence they place in other professionals.
reasonably be confused with one prior to January 1, 2020, will be allowed to continue using the protected titles without a credential for five and three years respectively. If their current designation is accepted by FSRA as a credential, they will not be required to obtain further qualifications. Individuals who started using the protected titles after January 1, 2020, will need to cease once the FPTPA comes into force and obtain an approved credential from an approved credentialing body before using the title again. Ontario is the first Canadian jurisdiction to pass law proposing to protect both financial planner and advisor titles. In Quebec, the Autorité des marches financiers (AMF) has been licensing financial planners since 1998. To acquire such licence, an individual must obtain a diploma
voluntary compliance, it will be vital that this new title protection regime be implemented with efficiency and transparency. The public takes comfort in the titles of the professionals it employs, such as doctors, lawyers and engineers. Considering the implications of financial planning on individuals, their confidence in the planning and advising of their financial affairs ought to be as grounded as the confidence they place in other professionals. Ensuring their comfort is not misplaced is common sense and a welcomed development. Burokas Law is a Toronto, Ontario, law firm. Michael Burokas completed his Juris Doctor at the University of British Columbia, Faculty of Law and is a member of the Toronto Lawyers Association and the Ontario Bar Association. CMB MAGAZINE
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legalease
TOO MUCH OF A GOOD THING? Advancing funds beyond the face value of a mortgage BY RAY BASI, J.D., LL.B., STAFF, EDUCATION AND POLICY REVIEW
BACKGROUND
WHAT HAPPENED?
You are a mortgage broker who lends your own money. You have made a sizable loan to partially fund a commercial development. The owner of that development is now experiencing financial difficulties. Without further funds from you, the project will come to a grinding halt and you are likely to lose your entire investment. You are willing to lend the further funds you believe will salvage the project, but your mortgage is already advanced to its full face value. Registering a further mortgage is out of the question as there is already another mortgage registered and funded after yours. You are not willing to advance further funds unless they would have priority over those advanced under that later mortgage. The later mortgage is not willing to sign an agreement that would give your mortgage such priority. Your circumstances and concerns are not unusual. Commercial projects frequently involve a number of lenders making advances in overlapping time periods and under complex arrangements. This can lead to confusion as to priorities among the advances. The BC Court of Appeal in Forjay Management Ltd. v. 625536 B.C. Ltd., 2020 BCCA 70 provides valuable guidance in sorting out such confusion. It decided that: n In some circumstances, a mortgage does secure advances made in excess of its face value; and n In some circumstances, advances made by a lender who has knowledge of a subsequent mortgage already having made advances may nevertheless have priority.
A developer purchased land using a first mortgage of $4.2 million and assumed a second mortgage of $1.8 million. He intended to build a 92-unit tower on the land. The developer later arranged financing to develop the project with one of the investors in the first mortgage joining with two other parties to lend $10 million. The $10-million mortgage was registered as a second mortgage, the holder of the $1.8-million mortgage granted priority and reduced itself to a third mortgage. The resulting development financing was as follows: n First mortgage of $4.2 million n Second mortgage of $10 million n Third mortgage of $1.8 million
The Court provided details as to some circumstances that would trigger these results.
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The development did not proceed smoothly and ultimately failed. In the course of the project, approximately $14.6 million was advanced under the first mortgage, being approximately $10.4 million more than its $4.2-million face value. As well, approximately $21.8 million was advanced under the second mortgage, being approximately $11.8 million more than its $10-million face value. A receiver was appointed. Disputes arose between the holders of the three mortgages as to what monies were secured by the respective mortgages and the priority each had to be paid back.
ADVANCES EXCEEDING FACE VALUES OF FIRST AND SECOND MORTGAGES The Court decided the funds advanced in excess of the face values of the mortgages were secured by the respective mortgages.
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legalease The Court said that the face value of a mortgage does not limit the amount secured by the mortgage. It does not cap the amount that will be secured by the mortgage where the terms of the mortgage allow further advances to exceed the face value. The first and second mortgages each stated a face value but contemplated further advances, such as for interest, costs, protective disbursements, advances and readvances from time to time, and the lender unilaterally paying workers and suppliers. Accordingly, such advances were made pursuant to the mortgage terms and were to be included in the amount secured by the respective mortgage. The Court went on to explain that the land registry system provides certainty of title and existing encumbrances. It puts a person wanting to know the value of a mortgage at a certain time on notice to make further inquiries. Although a person could not determine the amount owing under a mortgage from the registered document, the registered document provides sufficient information so the person can acquire whatever information he or she wants or needs prior to filing a subsequent mortgage.
TAKEAWAYS Advances made in excess of the face value of the mortgage but in accordance with the terms of the mortgage can be secured by the mortgage. It is not wise to rely on the face value of the mortgage as indicative of the amount owing under the mortgage. It is safer to order a balance statement from the lender.
PRIORITIES AMONG ADVANCES The first and second mortgages made advances after they each had actual notice of the third mortgage having been registered and advanced. Did those advances have priority over the advances made under the third mortgage? This raises the legal concept of tacking. If the earlier mortgages have priority for their later advances, they are said to be permitted to tack onto their mortgages. Historically, courts allowed tacking where the lender of an earlier mortgage advanced money without having actual knowledge
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legalease
of the later mortgage. When the BC Land Title Act was enacted, it effectively provided that registration of a charge at the Land Title Office was considered to be notice to the world of the charge. This is referred to as constructive knowledge, in that a person is treated as if they had actual knowledge even if they did not in fact have it. This begged the question as to whether constructive knowledge of a later charge was enough to prevent tacking or whether actual notice continued to be needed. The BC Property Law Act, s.28 makes it unnecessary to resolve the constructive knowledge versus actual knowledge issue. It limited tacking to four situations: n The parties agreed in writing to the priority of the further advances. n At the time the further advances are made, the prior mortgagee had not received notice in writing of the registration of the subsequent mortgage, from its owner or holder. n At the time the further advances are
made, the subsequent mortgage had not been registered. n The mortgage required the prior mortgage lender to make the further advances. In this case, the third and fourth bullets were not applicable. The third mortgage was registered at the time of the further advances by the first and second mortgages, and the first and second mortgages were not required to make the further advances. The first bullet settled the priority of advances as between the second and third mortgages. The third mortgage (initially the second mortgage) had signed an agreement giving priority to the second mortgage (initially the third mortgage). The second bullet settled the priority of advances as between the first and third mortgages. Advances under the first mortgage had priority over those made under the third mortgage because the first mortgage had not received the required
RAISING THE STANDARDS WITH INTEGRITY, ACCURACY AND SPEED
written notice from the third mortgage lender. In the absence of the legislatively required written notice, it was irrelevant that the first mortgage had actual notice of the third mortgage. [Note that in some provinces, such as Ontario, the legislation provides that actual notice is sufficient to prevent tacking.] A fuller discussion of what it takes to satisfy the four above bullets so as to prevent tacking can be found in the Spring 2018 edition of this magazine at pages 16 and 36. The magazine archive can be found at cmbabc.ca.
TAKEAWAYS In determining whether tacking is permitted, it is irrelevant whether the prior mortgage lender had actual knowledge of the subsequent mortgage. To prevent tacking by the prior lender, the subsequent lender should ensure that the legislatively required written notice is provided to and received by the prior lender.
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fromthebench
SUPREME COURT RULING ON HYPOTHEC EXPIRY DATE This case in brief, TD Bank V. Young, illustrates a decision from the bench
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n 2009, Ms. Macht got a loan for $306,000 from TD Bank. The loan was secured by a hypothec on her house. (A hypothec in Quebec’s civil-law system is like a mortgage in common-law provinces and territories.) She also got a loan of about $94,000 from the Youngs. It was also secured by a second hypothec. The Youngs knew about the first hypothec with the bank. Ms. Macht stopped paying her loans. If a hypothec doesn’t get paid, the person owed money can force the property to be sold or can take it themselves. The Youngs asked the Quebec court to force Ms. Macht to give up the house in order to pay the debt she owed them. In 2011, the court declared them the owners. But the bank still had its hypothec on the house. Shortly after, the bank asked the court to be allowed to take the house from Ms. Macht because its hypothec wasn’t paid. But the Youngs owned it now. They paid the bank what Ms. Macht owed in missed payments, even though they didn’t agree they had to. The bank asked the court to force the Youngs to give up the house in order to pay Ms. Macht’s debt. The trial judge agreed with the bank, and said it was the owner. The Court of Appeal disagreed. It noted that
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the bank only took action against the Youngs, who owned the house at the time. The bank didn’t take action against Ms. Macht, who personally owed it the money. The Court of Appeal said the hypothec didn’t exist anymore. It had expired even before the trial judge made his decision. The bank should have taken action against Ms. Macht to stop it from expiring. But the time had expired, so it was too late for it to do this and try to get its money back from the Youngs. The Supreme Court decided this case “from the bench” at the end of the hearing on November 7, 2019. When a case is decided “from the bench,” it means an oral decision is given right away. The parties don’t have to wait for a written decision, which takes some time (an average of about five months in 2019). About a third of decisions were given from the bench in 2019. When a case is decided from the bench, the Court will sometimes give a written explanation (reasons) later. This can be done to make things more clear. In most cases, though, there won’t be written reasons. This doesn’t mean there is no explanation. When giving the oral decision, the Court might give a short explanation, or say something like, “we allow (or dismiss)
this appeal substantially for the reasons given by the Court of Appeal.” That means it’s relying on the reasons of the lower court, which basically got it right. In this case, the majority of judges agreed completely with the Court of Appeal. The Court of Appeal’s decision stayed in effect. That meant the Youngs got to keep the house and the bank couldn’t claim anything on it. Canada has two major legal traditions, common law (based on English law) and civil law (based on the French civil code). Quebec is the only province that applies civil law. It can be found in the province’s Civil Code, which applies to most noncriminal legal issues. Some concepts – like mortgages and hypothecs – are similar under common law and civil law. But they are often based on different principles and can have different rules. Having two main legal traditions helps make Canada unique. In fact, the Supreme Court of Canada is the only bilingual (two languages) and bijural (two legal systems) supreme court in the world. Source: www.scc-csc.ca/case-dossier/ cb/2020/38242-eng.aspx Reproduced with the permission of the Supreme Court of Canada CMB MAGAZINE
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WORDS TO LIVE BY Inam Qureshi originally planned to become a doctor, until he took a job in the banking industry at age 19. There, he discovered his passion for helping people finance their dreams. Today, he’s steadily growing his own company, Syndicate Lending Corporation, through patience, persistence and perseverance. BY LISA GORDON
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brokerprofile
P
atience, persistence and perseverance. Inam Qureshi credits those three qualities for his success not only in commercial mortgage brokering but also as an entrepreneur, business coach and amateur chef. Whether he’s crafting complicated mortgage deals or whipping up an evening dinner party for friends and family, Qureshi says those are words to live by. As the owner and founder of Vancouver-based international commercial brokerage Syndicate Lending Corporation, the 33-year-old has realized some remarkable achievements since he came to Canada from India in 2006. Just 18 years old at the time, Qureshi was studying to enter medical school, but those plans changed the following year when he took a job at a bank as a personal banker. There, he found his calling, helping people achieve financial success. Qureshi progressed rapidly through more challenging roles as a retail mortgage specialist and then as a commercial banker, spending eight years in total with the chartered banks. “I was making a difference in people’s lives, helping them finance their dreams,” he told Canadian Mortgage Broker. “That helped fuel my desire, and I kept progressing through it. Little by little, I took on more complex deals, and the rest is history.” In 2015, Qureshi founded Syndicate Lending Corporation, earning an independent brokerage licence the following year. At the time, there weren’t many businesses specializing in commercial financing. “We look at various aspects of financing, including businesses, commercial purchases, construction projects, apartment buildings, aircraft, yachts, marinas, pretty much anything that is secured by some form of real estate.” In the early days of the business, it was just Qureshi and one associate. Today,
Syndicate Lending includes 11 licensed brokers in two Vancouver-area offices. The company has been focused on expansion since inception. This year, it entered a joint-venture arrangement with a prominent investment banking firm in London, U.K., as well as in Dubai, UAE. Qureshi said those locations are more focused on corporate debt advisory services, but they are working to grow the Syndicate Lending (SLC) brand, focusing on mortgage brokering. And, while the company is currently found only in B.C., Syndicate Lending is looking to expand into other provinces once it identifies strategic partners. Qureshi said the Canadian Mortgage Brokers Association (CMBA) played a vital role in his success during the early days of setting up the brokerage. Attending the organization’s trade shows allowed him to build lender connections, which were instrumental to establishing his company. To give back to the mortgage community, he recently hosted a workshop for CMBA members on how to process their first commercial deal. Down the road, Qureshi would like to help the association build a commercial training program. “All throughout my career, I’ve been a fan of training, coaching and mentorship,” he said. “I am happy to mentor budding mortgage brokers, and that is my biggest focus for 2020, to give back.” Qureshi invites commercial brokers who are starting out to ask him questions. “At Syndicate Lending, we don’t hold back on training. As a company, we love to mentor our colleagues and our team.” In addition to helping fellow mortgage professionals, he puts his commercial banking experience to good use as a volunteer adviser for several new businesses. “I enjoy seeing businesses develop and take flight. I know how to help them, and this is my way
of giving back to the community at large.” While he loves the commercial mortgage business, Qureshi admits it can come with a great deal of stress. At those times, he heads back to nature, taking advantage of B.C.’s plentiful wilderness and pristine waters. Or, if he really wants to unwind, he’ll head straight for the kitchen. “I find a lot of pleasure and stress relief in cooking. Occasionally, if I’m really stressed out from a hectic day, I unwind in my kitchen and experiment with new recipes. I find peace and solace there. I entertain many friends; I cook a lot of traditional Indian cuisine.” Looking ahead, Qureshi’s goal is for Syndicate Lending to become a premier global commercial lending firm. “My aim is to have our presence in most international trade hubs,” he explained. “We want to be in the U.S., hopefully by the middle of next year. We want to be known for personalized service with a boutique nature.” As he looks back on the many transactions he’s closed and the clients he’s served along the way, Qureshi takes satisfaction in having helped many couples buy their dream home, or assisting now-established developers with their first commercial transactions. He is a passionate advocate of commercial lending and its value in the community. “Commercial financing is a complex aspect of helping people finance businesses, which in turn creates jobs for other people.” Patiently, Inam Qureshi acquired his industry experience over years spent in the banking industry. Persistently, he worked toward his dream of founding his own independent commercial mortgage brokerage. Today, he is persevering in his quest to expand that operation into a globally recognized boutique operation that is committed to personalized service. Words to live by, indeed.
“I am happy to mentor budding mortgage brokers, and that is my biggest focus for 2020, to give back.”
IMAGE COURTSEY INAM QURESHI
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CMBA advertisers index
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Fisgard Capital Corporation 27 BC, AB, SK, MB, ON
New Haven Mortgage Corp. 27 ON
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Gentai Capital Corporation BC, AB, ON
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Alta West Mortgage Capital Corporation 10 BC, AB, ON
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Spectrum Canada Mortgage Services Inc. 13 BC, AB, ON
Armada Mortgage Corporation 13 BC, AB, ON
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ThreePoint Capital 21 BC, AB, MB, ON
Canadian Mortgages Inc. 30 National
Home Trust Company 31 National
VWR Capital Corp. 10 BC, AB, SK, MB, ON
CWB Trust Services 16 BC, AB, SK, MB, ON, ATL
Lanyard Financial Corporation 13 BC
Westboro Mortgage Investment Corp. 27 ON
Cove Mortgage Ltd. 21 BC
Lawrenson Walker Realty Advisors 26 BC
Equitable Bank 26 National
Mandate Mortgage 6 BC
First National Financial LP 2 National
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