$25K penalty for broker raises concerns

by |

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.

  • AB Broker on 2012-05-15 4:04:21 AM

    Should have been a lifetime ban!! It's too bad the article didn't state the name and brokerage firm of the individual. Sadly, there are many more out there. By naming these individuals hopefully we can run them out of our industry.

    I challenge all brokerages to clean house! You know who the bad apples are and if you don't rid yourself of the liability, you are as guilty as the associate doing the fraud!!

    On with the mortgage revolution!

  • anonymous on 2012-05-15 4:22:39 AM

    As a mortgage broker, I recently lost 2 deals to bank reps with a lender who 'made it easy' for clients - apparently they 'made it easy' by not asking/using appropriate docs/information--but I have no proof. Hope there is as much scrutiny on their service delivery as on our industry.

  • Paul Mangion on 2012-05-15 5:13:39 AM

    Good. I wish they would start doing that in Ontario. If FSCO really wants to protect the consumer they should spend more time investigating the fraudulent agents and less time worrying about how your license number does not show on every page of your website. They won't be too hard to find since all the realtors know who they are.

  • Terry on 2012-05-15 5:58:32 AM

    Well, let's not just blame brokers because I personally know where banks themselves are pushing through the same type of deals. Just like, Banks seem to get deals pushed through the insurers when their credit is slow, as I hear they do get a Free Bee once in a while, so I think some Brokers get frustrated knowing this is going on !!!!

  • Irene on 2012-05-16 1:15:13 AM

    Does full disclosure apply to a property one owns under a corporation?

  • Bobby on 2012-05-16 1:33:56 AM

    This sort of behavior definitely doesn't belong in our industry! Its people like this that are greatly responsible for the departure of some lenders. The brokers name can be found on the BC FICOM website under 'Enforcement' and then 'Mortgage Brokers' for all to see.

  • anonymous on 2012-05-17 3:20:49 AM

    i know of a broker who was fined an excessive amount for giving a client a note loan to purchase a vehicle through an auction until his mortgage funded within 2 weeks which the note loan was paid back to the brokerage house. For that he was investigated and fined an excessive amount as apparantly he had a interest in the mortgage and the form 11 indicated he didn't,as well the broker was penalized for not disclosing a commercial apartment building owned by one of the clients holding companies?I wonder how many RESPECTABLE Mortgage professionals out there may be in the firing line? I think there is always 2 sides to any story as was the case with this guy.

  • Alberta on 2012-05-17 5:08:45 AM

    Anyone referring to this broker as 'Respectible' after reviewing the FICOM filing is clearly not respecable himself/herself! Have you read the FICOM investigation? He was cited with numerous violations, non-disclosures, missing and misleading information and so on. There may well be 2 sides to a story... but get real! You think the fine was excessive? I say it wasn't enough. Brokers are required to disclose anything and everything material to the lender and if we don't, we are simply doing a bad job. Our industry need to get rid of behaviors like this! Here in AB, we don't see enough of action like this. I commend this decision and I'm sad to see there are people that post defense of this behavior as somehow just being a broker put into the firing line... put into the firing line for unethical behavior.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Name (required)
Comment (required)
By submitting, I agree to the Terms & Conditions