Brokers call for license crackdown

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The case of 45 mortgage brokers facing suspension in the wake of allegedly falsifying documents is leading industry players to call for more ethics-based broker training.

“I think they need to work more on the ethics side when it comes to licensing,” Walid Hammami, a Montreal-based broker with Dominion Lending Centres told MortgageBrokerNews.ca. “Most of these guys feel pressure to get clients and compromise themselves as a result; they are under pressure and want to make money as fast as possible.”

Home Capital announced Thursday it had severed ties with 18 independent brokers and two brokerages – a total of 45 brokers – after an investigation pointed to falsified information about borrowers’ income.

The contracts were suspended between September and March and the lender attributes these suspensions to a loss in mortgage originations.

Some believe ever-tightening guidelines may have encouraged these brokers to bend the rules.

“You can give everybody education but you can’t change their values,” Tony Piattelli of Verico Quantus Mortgage Solutions told MortgageBrokerNews.ca. “The education should be much more focused on fiduciary duty but brokers aren’t making as much money as they once were and I’m not sure if some people are retaliating against the mortgage tightening because they don’t agree with it.”

The lender has not determined whether the brokers, themselves, were responsible or if it was the clients who falsely reported income.

“We have no proof brokers were responsible themselves, but business flows through them, so we held them accountable,” said Martin Reid, president of Home Capital.

Yet, certain players are calling for the regulators to strip the licenses of the brokers if they are proven to have knowingly included incorrect information.

“If it’s proven that they knowingly passed on fraudulent information then they should have their licenses stripped,” Piattelli said.
Added Hammami: “It’s not only up to the lenders – the brokerages have a part to play as well. The onus is on both of them and the regulators; if brokers are caught forging documents their licenses should be taken away.”
 
  • Ron Butler on 2015-08-05 2:31:16 PM

    I like Tony's comments, the truth is you can NEVER legislate away bad intentions. Whether you add layers and layers of fraud education to our business (which is fine, the info is useful) or you expand investor disclosure to 12 pages or 50 pages it has little or no effect on the people who WANT to do fraud. Those bad folks will find a way no matter what barriers are built. So better to really pursue the evil doers relentlessly.

  • Cinzia on 2015-08-05 3:49:17 PM

    aggressive focus on meaningful, front line mortgage training - ie, how to package a file, how to find solutions for clients who don't fit into the new restricted govt/lender boxes may also reduce the level of fraud overall; it's getting harder to get files approved, this is a fact. For those brokers whose mainstay has been vanilla AAA deals, I'd imagine their income has taken a serious down turn. The easy road to fix that for some, if they're so inclined, would be fraud. the best solution is mandatory MEANINGFUL training. Better ability to find a solution to more files, means a greater % of your deals with fund, means you're not desperate to find ways to get around seemingly impossible barriers. we all have families to feed, and while this is not a solution for brokers who HAVE committed fraud, it would perhaps help keep more brokers away from it. I would respectfully suggest the mandatory training brokers must take to renew their licences could be revamped/greatly enhanced by some 'real, plain english, with real examples' training. Another suggestion would be to have mandatory mentorship (ie, 1 yr, seasoned broker must provide to new broker - with CAAMP formulating a list of required issues to be addressed and also matching the brokers up, as part of regulatory licensing requirements).

  • Cinzia Dalgarno on 2015-08-05 3:50:25 PM

    aggressive focus on meaningful, front line mortgage training - ie, how to package a file, how to find solutions for clients who don't fit into the new restricted govt/lender boxes may also reduce the level of fraud overall; it's getting harder to get files approved, this is a fact. For those brokers whose mainstay has been vanilla AAA deals, I'd imagine their income has taken a serious down turn. The easy road to fix that for some, if they're so inclined, would be fraud. the best solution is mandatory MEANINGFUL training. Better ability to find a solution to more files, means a greater % of your deals with fund, means you're not desperate to find ways to get around seemingly impossible barriers. we all have families to feed, and while this is not a solution for brokers who HAVE committed fraud, it would perhaps help keep more brokers away from it. I would respectfully suggest the mandatory training brokers must take to renew their licences could be revamped/greatly enhanced by some 'real, plain english, with real examples' training. Another suggestion would be to have mandatory mentorship (ie, 1 yr, seasoned broker must provide to new broker - with CAAMP formulating a list of required issues to be addressed and also matching the brokers up, as part of regulatory licensing requirements).

  • FYI on 2015-08-05 3:55:14 PM

    Make no mistake, the mandate of RECA, FSCO and other regulators is to protect the public. They have no interest in protecting lenders. These types of frauds were against a lender and thus outside the regulator's scope.

    Regulators only care about frauds against the public. As far as they are concerned these frauds assisted the clients.

  • Ad Lakhanpal,Mortgage Alliance on 2015-08-05 4:08:53 PM

    No amount of lectures,advisories,training programs or seminars will make a significant dent in the fraudulent activity.

    The basic problem is that there have not been any adverse consequences of falsifying information. Once a mortgage is registered, neither the lenders nor the insurers take any steps to revoke it or hold people accountable, even if the fraud is discovered later on. Generally,the borrowers are also fully aware of the falsified documents, but they are not fearful because they know they won't lose their mortgage,once it is in place.It is a crime without punishment.

    Nothing is done even at maturity. The same borrowers are enthusiastically offered unconditional renewal by the same lenders, without any prejudice.

    There is a lack of interest in curtailing it all through the chain, because everyone benefits;at least during boom time. Wait until the market turns!!

  • Jeremy on 2015-08-05 4:12:14 PM

    It's high time we hold these cockroaches accountable, brokers and their associates alike. When volumes trump ethics, houston...we have a problem!

  • The Helper on 2015-08-05 4:15:09 PM

    simple answer... publish the names of the brokerages/brokers/agents

  • Cinzia Dalgarno on 2015-08-05 4:38:33 PM

    Ad Lakhanpal - your comments regarding no consequences... are inaccurate. google mortgage broker charged for fraud - and after the 1st 2 pages of home capital articles LOL, you will come upon several news items confirming that there are indeed consequences. consequences are reactive. how about having a multi faceted solution, including preventative measures (ie TRAINING, thus less need for fraud), more stringent consequences, AND, more aggressive monitoring/consequences for un-reported (ie brokers/lenders) and not identified (ie brokers/lenders) fraud. if we incorporate a 3-way attack - maybe we'll make a dent. what do you think?
    THE HELPER - really? that's it? how is that proactive? how is that helpful to the industry, other than making those brokers who are GOING down that road, be even MORE careful? how does this make our industry stronger?

  • Jeremy on 2015-08-05 4:46:35 PM

    It baffles me when our regulators mandate ethics courses. You can't teach ethics, dummies! You are either ethical or not...it's that simple!

    It's high time we name these cockroach brokers and their associates alike. Let's hold the brokerages accountable for their brokers/associates...now there's a good idea.

    When volumes trump ethics, houston, we have a problem!

  • th3uglytruth on 2015-08-05 5:37:38 PM

    This happens even with Bankers. They just happen to get away with it all the time.

  • Ad Lakhanpal,Mortgage Alliance on 2015-08-05 7:36:09 PM

    Cinzia,

    Your argument on training are well intentioned but the reality is that people who commit fraud are generally more knowledgeable than the average practitioner.

    Suspension by Home Trust of some brokers is a recent event. These brokers can always go to another lender. They can put their business through someone else etc.

    I am suggesting that it would be more effective if an action is taken re the mortgage and the mortgagor. Once a mortgage gets recalled, the word will spread rapidly so that other potential borrowers will be afraid to use falsified documents. The broker in question will get a bad name and will be shunned by the potential clients as well as the referral sources such as real estate agents. When people have to run around and arrange a new mortgage to save their house, they will make sure that the broker in question becomes famous!!

  • abby on 2015-08-06 6:11:51 PM

    Didn't we buy our ethics with an AMP badge
    Like so many I know did

  • Appraiser on 2015-08-06 10:56:39 PM

    Let's all not be so naive, please. There may be income falsification here, but it could very well be mainly to the CRA.

    Imagine, people not declaring all of their earnings (gasp). Imagine people making cash on the side. Imagine the plethora of Canadian "one percenters" hiding $billions in offshore accounts. Oh the humanity.

    Why do you think that the arrears on the "falsified files" at HCG are so low - actually outperforming the rest of their portfolio?

  • Ross Taylor on 2015-08-07 3:20:22 AM

    Publish the names of the miscreants, and develop and publish consequences for such activities; you can even have first offense, second offense, repeat offender type punishments.

  • The Helper on 2015-08-07 2:10:43 PM

    Cinzia, once the lenders know the names, they will not risk dealing with these people. no lender wants to account to their shareholders or board of directors regarding this.

  • David Repetowsky on 2015-08-09 6:31:10 PM

    that these so-called “elites” do it, so why cannot the individual person get his/her share?
    Fourthly, if there would be an Ethics Course taught, then it should be a framework of an ethical decision-making Model. Such a Model would define personal factors, legal issues, and others that are part and parcel of ethical dilemmas. Fifthly, Brokers/Company leaders are required to lead by example; they have a responsibility to create an ethical climate inside their respective teams/companies.
    PART B – PROPOSED APPLICATION
    1. ETHICS COURSE: I do not believe that increasing the number of Ethics Courses helps the issue. There should be one serious Ethics Course offered to each and every licensed person. They must pass it as a condition of their respective license. In Alberta, RECA is putting on Required Updates annually. The Course was interesting and it showed several innovative ways as to how fraud was perpetrated. However, in that 2015 update, the Course showed some interesting scenarios, not all of which are prima facie frauds. In a rapid rising market, it is a fact that value increases. Some investors, and their agents, push it too far. It is not simply the domain of mortgage brokers; there are also R.E. Brokers/Agents. Appraisers, Lawyers, Banks/Lending Institutions and even Real Estate Boards and eventually Municipalities, and others, who all profit from this increased value. For mortgage brokers, all it appears to do is drive up the annual costs of Licensing. RECA, as a Police Power, has exploded in personnel over the last one to two decades.
    2. ADDITIONAL DESIGNATIONS: Additional Courses and designations are generally useless, other than for intrinsic personal development skills. When was the last time any potential house-financing customer asked you for your credentials or designations…….or gave you an application because you have a BA or CFP or FRI or MBA or AMP or a plethora of other designations?
    3. LIMIT NUMBER OF LICENCES GRANTED: I believe that there should be greater barriers to entry for new people trying to get into the mortgage brokerage business. Firstly, in Alberta, RECA registers three licensing professions, including Mortgage Brokers/Agents, Real Estate Brokers/Agents, and Appraisers. Each class of Licenses should be limited strictly to their intended field of work. Realtors should be limited to transacting real estate sales, period. Mortgage Brokers should be limited to transacting financing, period. And, Appraisers should be limited to valuations, period. Secondly, it should be more difficult to get a Mortgage Broker / Agent License in the first place. In BC, at several years ago, a person could not get a license if he/she were only planning part-time work: All Licensees had to be employed full-time in the Sector for which they were applying. The result would be that there would be more business available for the people who are actively employed in arranging financial service sector.
    4. RECA AS A BROKER’S RESOURCE: Currently, in Alberta, RECA acts solely a policeman against all the licensees who pay for its existence. This is wrong. RECA should also be a resource for existing Licensees to assist in ethical and legal development of their respective business. As one of the earlier writers mentioned in their comments, the drive is for a person to feed their respective families. So, in addition to providing direction of legal matters, RECA should also help with business development.
    PART C - CONCLUSION: The importance of ethics is lived out through the practices of responsibility and accountability, from the Federal Government, Provincial Governments, Cities, and Municipalities to the individual; family and person. In addition to systemic changes, as delineated above, leaders in every Brokerage organization are challenged with the duty of establishing the necessary conditions for an environment that demands ethical conduct. It cannot be any other way…we all must take the high road!

  • David Repetowsky on 2015-08-09 6:32:09 PM

    that these so-called “elites” do it, so why cannot the individual person get his/her share?
    Fourthly, if there would be an Ethics Course taught, then it should be a framework of an ethical decision-making Model. Such a Model would define personal factors, legal issues, and others that are part and parcel of ethical dilemmas. Fifthly, Brokers/Company leaders are required to lead by example; they have a responsibility to create an ethical climate inside their respective teams/companies.
    PART B – PROPOSED APPLICATION
    1. ETHICS COURSE: I do not believe that increasing the number of Ethics Courses helps the issue. There should be one serious Ethics Course offered to each and every licensed person. They must pass it as a condition of their respective license. In Alberta, RECA is putting on Required Updates annually. The Course was interesting and it showed several innovative ways as to how fraud was perpetrated. However, in that 2015 update, the Course showed some interesting scenarios, not all of which are prima facie frauds. In a rapid rising market, it is a fact that value increases. Some investors, and their agents, push it too far. It is not simply the domain of mortgage brokers; there are also R.E. Brokers/Agents. Appraisers, Lawyers, Banks/Lending Institutions and even Real Estate Boards and eventually Municipalities, and others, who all profit from this increased value. For mortgage brokers, all it appears to do is drive up the annual costs of Licensing. RECA, as a Police Power, has exploded in personnel over the last one to two decades.
    2. ADDITIONAL DESIGNATIONS: Additional Courses and designations are generally useless, other than for intrinsic personal development skills. When was the last time any potential house-financing customer asked you for your credentials or designations…….or gave you an application because you have a BA or CFP or FRI or MBA or AMP or a plethora of other designations?
    3. LIMIT NUMBER OF LICENCES GRANTED: I believe that there should be greater barriers to entry for new people trying to get into the mortgage brokerage business. Firstly, in Alberta, RECA registers three licensing professions, including Mortgage Brokers/Agents, Real Estate Brokers/Agents, and Appraisers. Each class of Licenses should be limited strictly to their intended field of work. Realtors should be limited to transacting real estate sales, period. Mortgage Brokers should be limited to transacting financing, period. And, Appraisers should be limited to valuations, period. Secondly, it should be more difficult to get a Mortgage Broker / Agent License in the first place. In BC, at several years ago, a person could not get a license if he/she were only planning part-time work: All Licensees had to be employed full-time in the Sector for which they were applying. The result would be that there would be more business available for the people who are actively employed in arranging financial service sector.
    4. RECA AS A BROKER’S RESOURCE: Currently, in Alberta, RECA acts solely a policeman against all the licensees who pay for its existence. This is wrong. RECA should also be a resource for existing Licensees to assist in ethical and legal development of their respective business. As one of the earlier writers mentioned in their comments, the drive is for a person to feed their respective families. So, in addition to providing direction of legal matters, RECA should also help with business development.
    PART C - CONCLUSION: The importance of ethics is lived out through the practices of responsibility and accountability, from the Federal Government, Provincial Governments, Cities, and Municipalities to the individual; family and person. In addition to systemic changes, as delineated above, leaders in every Brokerage organization are challenged with the duty of establishing the necessary conditions for an environment that demands ethical conduct. It cannot be any other way…we all must take the high road!

  • Bev Gay on 2015-08-09 7:49:55 PM

    You cant teach ethics its either there or its not, there are no consequences never had been in Real Estate, Banking or brokering its time for a change because I am getting sick of having to provide 5 pieces of paper to prove income and all of this is coming out of the fraud and wastes time and money for the honest brokers

  • Henry on 2015-08-09 10:37:01 PM

    What are you guys talking about.
    Remember these facts:
    1-Mortgage brokers are a kind of commission sale.
    2-Comission sales are when it is very hard to sell. Never heard Walmart has commission sale.
    3-A commission sale person must do every thing he can to sell the products and only the top 5% are successful.
    4- The qualified people go to the banks to get there mortgages and they go to the brokers when they are rejected by the banks.
    5-Even if people are rejected in the bank branch they will be contacted by the bank's commission base mortgage specialist to be approved.

    6-Brokers are struggling to make money and remember if their clients don't get the mortgage they won't make money too.

    Wake up. This is as the results of how the market works at the first place

  • andrew on 2015-08-10 11:46:35 AM

    You cannot make someone who is unethical, ethical. They don't have the moral compass that guides most people to make decisions clearly when faced with an ethical decision. Ethical courses are simply a way for regulators to say they are addressing the issue. The real problem is to source them out and remove them from brokering. Publish the names and fine them appropriately to mitigate others from doing the same.

  • Bo Xilai on 2015-08-11 2:05:25 AM

    These 45 brokers' names should be identified and the matter referred to RCMP and regulatory officials. Abetting or committing fraud has to have consequences. I fear the SHTF only when the housing market goes south... then everyone will be saying "I can't believe there was mortgage fraud" after the fact.

  • JERRY ROSE on 2015-08-11 8:54:59 AM

    The onus is on the lender to do their due diligence and verify the income and appraisal.
    When a lender discovers that fraudulent documents have been presented by a broker they should disclose the name & brokerage.It would then be up to the organizations such as IMBA & CAAMP to expel these individuals .If they are a member od an organization like Dominion Lending or Verico or any other brokerage .That organization should also through them out.
    How many of them have their AMP I wonder.

  • Lorne Rackel on 2015-08-11 10:17:14 AM

    I echo the comments that a fraudster is a fraudster. You can send them to a 100 courses on ethics but if they do not have a moral compass it will change nothing. A snake is a snake.

  • james on 2015-08-11 10:46:52 AM

    1. Kudos to HCG for making a stand. Don't let them back in.
    2. NO amount of ethics course will prevent cockroaches. Ethics are tested and broken everyday in the corporate world. It is one facet in how we differentiate ourselves.
    3. The generalization that commission sales is to blame and only 5% are successful is naive at best.
    4. The generalization the people only go to brokers due to declines is naive as well.

    Spouting so called "facts" to support one's tag line doesn't mean it is true.

    There are good ethical brokers out there; they are just the silent minority. Advertising "ethics" ain't sexy.

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