Broker calls for insurers to provide flagged properties list

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One industry player is calling on the mortgage insurers to make a list of red-flagged properties available to mortgage brokers and Realtors, after a deal fell through in the 11th hour.

“I think (a list of flagged properties should be made available to realtors and brokers) and the reason I say that is because if (a) condo is having a problem, then steps need to be taken to remedy that problem,” Joe Sammut of Mortgage Architects Mortgage Gate told “I believe that if we don’t have a list available and we don’t make this public knowledge so the consumer knows what they are about to embark on, there are people out there who might try to railroad a client into buying a property that they might otherwise shouldn’t have.”

Such a list would have come in handy when Sammut, who was referred to a deal by Toronto Realtor, David Fleming, felt he had a deal in the books before finding out that no mortgage insurer would provide insurance for a particular property – The Printing Factory Lofts in Leslieville; despite more than one lender willing to lend for the purchase.

And the reason for the blacklisting, according to Fleming, is because of the condominium corporation took out a $2 million loan to fund legal fees and repairs – without first consulting with condo owners.

“The Corporation took out a $2 Million loan from Laurentian Bank which was meant to top the Reserve Fund and help pay for various repairs, many of which the Corporation believes result from original construction deficiencies,” states a letter shared by Fleming on his blog that was circulated to residents of the building in November 2012 by the corporation. “As a result, the Board of directors considers that the Reserve Fund is now adequate, and has decided not to follow the Reserve Fund Study circulated to all owners in 2011.”

Because of the financial instability of the property, no client can fund a unit purchase with a high-ratio mortgage. And it came as a shock to both Sammut and Fleming, who are usually aware of any black-listed properties.

“In this particular case it was a beautiful property, great location and the applicant was absolutely stellar, so we didn’t think that there would be any issue,” Sammut said. “I had already pre-approved the client, didn’t believe there would be an issue with this particular property because any of the properties that David and I were discussing didn’t come up on the radar as (a property) that CMHC or Genworth would not insure.

“In 21 years of doing mortgages this one blindsided us; we didn’t have any reason to suspect there was a problem with the building and lo and behold, boom, we had it,” he said.
  • John Hamilton on 2014-01-30 8:41:02 AM


  • MP on 2014-01-30 8:54:04 AM

    Hopefully the client didn't remove subjects because you thought the property was a good one! I think such a list would be good. It would be good to include houses that are also non insurable.

  • Diane on 2014-01-30 9:15:26 AM

    Agreed @MP!

  • Anthony C on 2014-01-30 9:17:57 AM

    I agree that a list or online portal indicating unacceptable properties should be made available to the general public...

    However, the subject story itself may have been too eagerly edited for content...

    Did the deal get approved after the Pre-Approval was issued or not...? And if it was approved, what about conditions precedent, such as Status Review and Title Search?

    How could it fall apart at the "11th hour"...would a closing lawyer have not already followed Instructions as set out by the Title Insurer and Lender that the Status Certificate was reviewed and accepted, well before funding..?

    I've been there myself with a few deals on condo units inToronto, but the deals never got to final Funding Instructed because of the negative information after Status review...

    Either this story was too light on details or somebody representing the Buyer goofed up...

  • Gunther K on 2014-01-30 10:14:41 AM

    This used to be the norm. CMHC kept track of flagged properties, mostly condos, that had either legal issues, construction deficiencies or reserve fund issues. Don't know why they abandoned this practice. Perhaps it was the requirement and reliance on Status Certificates. But those don't always tell the tale either. Now it is not only condo's but grow ops too that would be on this list.

    Ministry throws around phrases like 'Best Practices'. Perhaps the requirement of Insurers to maintain a list of flagged properties and making it available to industry professionals would fall under that heading.

    I would be concerned about making it a public list as it may create a legal problem if the issue was minor in nature such as a frivolous law suit which must be declared in a Status Certificate. Such 'flagging' could have a negative impact on a property value and an owners ability to sell at fair market value

  • CM on 2014-01-30 10:57:01 AM

    This is a great idea. property Disclosure documents are not always completed as accurately as they should be and if it's a court ordered sale or the property is a rental or non-owner occupied, disclosure documents are not required.
    The same goes for the having a comprehensive list of properties that have been flagged for marijuana or other drug operations, which financing is hard to find for. We should have access to information so that buyers are making informed purchasing decisions and choosing good investments.

  • Sudershan on 2014-01-30 11:08:49 AM


  • PW on 2014-01-30 12:15:29 PM

    We are seeing this a lot, does not matter the age of the building.
    I always insist on a financing condition even though it seems safe. I always call CMHC or Genworth to make sure they will lend on the property- takes 2 minutes

  • Paolo Di Petta | on 2014-01-31 1:17:53 PM

    I think the other story here is that condos aren't all they're cracked up to be.

    Everyone likes to tout the "low maintenance" aspect of it, but when the condo corp can take out a $2M loan which massively affects the cost and marketability of the units, it's debatable whether you can actually enjoy that time, or whether you need to spend it working to recoup those losses.

  • Naveen on 2016-07-07 9:30:53 AM

    I am a first time home buyer looking for a condo in toronto. I was guided by a salesperson from a registered brokerage office to sign a firm deal on a property in Scarborough location. I had no condition on finance as I got pre-approval from one of the big bank. I waived the status certificate after reviewing with lawyer saying no concerns. Also I did a deposit of $10000.

    While processing my mortgage application bank identified the condo building itself was under do not list because of former grow op. My broker and lawyer advised me to approach other banks as well but am sent back for the same reason. I tried with the mortgage broker as well but no luck.

    The listing agent says that he is not aware of any such issues and he doesn't care if there was an grow op on the building common area. When I did a quick search in the Google I got to know this was a big news in 2010 as condo staff were involved in the operation.

    The broker of record is not ready to discuss the next steps with me as he claims the issue is at the listing agent end and they don't have any responsibility to research the matter for me.

    We also have a clause in the purchase agreement that the seller represents and warrants for any illegal growth of substance in the property and the building and the structures etc.

    Currently my broker and lawyer is saying they are discussing the matter with the seller lawyer to get money back but they are not much positive about it.
    My lawyer is advising to file a lawsuit if they don't agree to return the deposit.

    I cannot handle any legal expenses to fight back for my money. I have no clue how to deal this issue.

  • Dave on 2016-07-07 10:16:41 AM

    Paolo said it best. There is so much BS behind the scenes with these "Luxury" condos (aren't they all advertised like that now?) lol. Buyers have no clue what they are getting into.

    Can't wait for the news 5 years from now after all these condos went up so quickly in the GTA with no quality control behind them. Gonna be some ugly stories of special assessments.

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