Regulators are sending a caution to brokers prepared to fudge the truth for clients, fining one errant professional more than $30,000 for a lapse jeopardizing lenders but also the industry’s reputation.
In a brief consent order issued earlier this month, B.C.’s Financial Institutions Commission not only orders the broker to pay a $25,000 administrative penalty but some $10,000 to cover the cost of the regulator’s investigation. It also imposes a two-year suspension during which the mortgage professional is restricted from acting “as the designated individual of any mortgage brokerage in British Columbia.”
The stiff penalty stems from the submission of several applications on behalf of a client. Those documents fail to disclose that the borrower was also seeking financing to purchase other properties and that he or she also owned other properties, “the existence of which (the broker) ought to have been aware of,” finds FICOM.
“The broker also submitted mortgage applications to lenders indicating that the home(s) being financed would be owner-occupied when he ought to have known that they would not be,” continues the consent order.
The case also identifies an inadvertent failure to notify a lender about a possible conflict of interest.The broker also waived both his right to a hearing as well as an appeal.
All told, the B.C. censure has raised concerns among some industry professionals that a few brokers are cutting corners in an effort to protect deals in a slowing market. They’re also worried that the actions of a few might compromise collective efforts to build on the industry’s growing reputation – improvements that other regulators are now noting.
“In my opinion, your reputation has significantly improves as a result of stronger compliance, Philip Howell, CEO of the Financial Services Commission of Ontario, told more than 400 mortgage professionals at a recent IMBA conference. “We really do have to put the focus on the client, the consumer,”
Still, “a bad hire or an employee without proper qualifications can have damaging consequences for a brokerage, but also the industry."
The analysis both applauds progress made by individual mortgage professionals and the industry, as a whole, in the advancing professionalism and growing consumer awareness and respect.
That latter took a hit in the wake of the U.S. housing crisis and the role American mortgage professionals played in arranging subprime mortgages. That unfairly painted Canadian brokers with the same brush, complain industry veterans, although greater regulation both in Ontario and in other provinces has helped to reassure consumers.
Still, broker channel lenders continue to cite fraud as a major concern in dealing with mortgage professionals, an apprehension possibly strengthened by this latest B.C. case.