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

Notify me of new replies via email
Mortgage Broker News | 07 Apr 2016, 08:15 AM Agree 0
With syndicated mortgages back in the news, one veteran suggests further regulatory restrictions on these investments
  • Keith | 07 Apr 2016, 10:23 AM Agree 0
    I think that if there is going to be tighter regulations it should apply to ALL syndicates - regardless of size. There is risk associated with all of them, and frankly Ron's comments seem more than just a bit self serving considering that he has his own syndicated mortgage company. Yes they are smaller mortgages, but syndication is syndication - period.
  • Jesse D | 07 Apr 2016, 10:51 AM Agree 0
    Mortgages in general need to be regulated better and that includes banks/CUs, both branch and road rep levels. To ask focus to be put on syndicated mortgages is self serving especially when so many are lending their own private funds out. Firms like FDS/Fortress and Landmark are properly licensed and use full disclosure but then there are other firms like the now defunct Titan who were not. At the same time, we can say the same about pretty much every industry as there are good and bad apples everywhere.
  • Ron Butler | 07 Apr 2016, 10:54 AM Agree 0
    Let me correct Keith, I have NO syndicated mortgage company, that is a compete fiction. Our company does private mortgages and our syndications are almost exclusively among investor family members. It is simply ridiculous to compare 4 family members providing a first mortgage on a single family detached to a second, third or fifth position mortgage providing funding for soft costs on a $70 million dollar hi-rise project.

    There are many mortgage brokers, investors and media people in Ontario concerned about very large mortgage syndications. Based on the fact they added 7 pages to the Investor Disclosure document and as recently as 4 weeks ago publicly stated they were further investigating the offering of syndicated mortgages to investors I have to believe FSCO is thinking about it as well.
  • Jesse D | 07 Apr 2016, 10:55 AM Agree 0
    Mortgages in general need to be regulated better and that includes banks & CUs, both branch and road rep levels. To ask focus to be put on syndicated mortgages or stop their activity is ridiculous and self serving especially when so many are lending their own private funds out. Firms like FDS/Fortress and Landmark are properly licensed and use full disclosure but then there are other firms like the now defunct Titan who were/are not. People are losing money every day on stocks and mutual funds...where is the attention there? At least the proper syndicated mortgages due pay out 8% +. There are good and bad apples in every industry. We need to weed those people and businesses out and not single out any one industry or business.
  • Chuck Barrett | 07 Apr 2016, 10:56 AM Agree 0
    The regulation of syndicated mortgage lending should be based on the type of loans and the risk associated with each investment.

    For example, a properly underwritten syndicated first mortgage representing 65% LTV on an income producing property at a market competitive rate is far different then a syndication that raises money on a speculative condo project with a small amount of syndicated funds in subordinate position to a very large institutional mortgage.

    Each mortgage is completely different as to risk analysis, potential for loss and level of investor sophistication required.

    FSCO should bring in industry experts to assist in developing regulatory policy for each investment type.

    It appears that the more speculative syndication product should be regulated under the OSC with full prospectus required for each project being funded and be only open to qualified sophisticated investors.
  • Chris | 07 Apr 2016, 11:06 AM Agree 0
    I believe there should be tighter regulations for syndicated mortgages. Real Estate investment products such as MICs and REITs are much more regulated and they are not only regulated by FSCO but by Ontario Securities Commission as well. At the end of the day investors need to be protected and a lot of investors do not know what they are getting themselves into when they are investing with syndicated mortgages.
  • Evan | 07 Apr 2016, 11:39 AM Agree 0
    I have to agree with Keith. Ron seems to be the biggest opponent to the larger syndicators, and yet he has his own small mortgage syndication. As for the comments regarding collapse, etc. This is far more regulated than examples of other investment vehicles from the 80's and 90's. Add to it that from what I have seen the developers that the biggest player, Fortress, partners with are very large and extremely well established developers.

    The only difference here is that Ron does single family dwellings and Fortress does larger developments. Either way, there is a chance that the development could fail.

    Investments are a risk. Period. It is up to the consumer to decide if they are comfortable with that risk, and I have seen the FSCO mandated rule changes for disclosure - they are tougher for syndication than they are for stocks, mutual funds, or almost any other investment I have seen.
  • Ron Butler | 07 Apr 2016, 01:47 PM Agree 0
    Chuck makes the key point, OSC should be regulating the huge projects. My belief is that plain vanilla mortgage lending can be syndicated but our industry must pause and rethink massive syndication. In many provinces large scale syndication is outlawed already, huge projects must fall under securities regulation.

    To say that all syndication is the same misses the point, by its very nature massive syndication is inherently different.
  • Kurtosis | 07 Apr 2016, 05:37 PM Agree 0
    Evan I think you have a gross misunderstanding of risk. No mortgage broker has the capability or qualification to assess the suitability of these products in the context of a total portfolio. This I can assure you.
  • Keith | 08 Apr 2016, 09:48 AM Agree 0
    Ron... Syndication is syndication - period. If tighter regulations are needed, then it should be on ALL syndications.

    The only reason why the smaller ones are not perceived as being a big deal is because when there is a loss... it doesn't make the news. The larger companies actually provide data on their arrears rates, etc. - because they are required too. The smaller companies, like yourself, are not required too and they do not report to the news if there is ever a construction delay or a loss.

    What's good for the goose is good for the gander. If FSCO starts to put even more pressure on the bigger syndicators, I for one will be putting pressure on them to ensure that ALL are treated equally.
  • Michael | 10 Apr 2016, 02:59 PM Agree 0
    Clearly there are a lot of people with vested interests here.

    I've been aware of Fortress and the Fortress model for ages, and have steered well clear of anything even remotely similar. To say that all syndication is the same is patently wrong. It's only the same in the sense that you're bringing together investors into a certain class of investor. THAT is where any similarities end.

    The biggest and clearest differences occur where development exists. Speculative projects are always going to be a far bigger risk than lending against an existing property with an assessed market value. Lending for soft costs is always going to be a far bigger risk than lending on a completed structure which has an immediate-sale value.

    New regulation, if any, needs to be applied to syndications where funding is for any incomplete project or for soft costs. All other things being equal, when you have an existing fixed asset with an appraised market value to use as collateral for a loan, your risk goes way, way down, provided you apply a prudent LTV. If a big speculative development project fails, everyone is left fighting for their money from a patch of dirt. What are the 4th ranking mortgage syndicate members going to sell to recoup their soft costs... the architectural blueprint documents...?
  • Rachelle | 12 Apr 2016, 11:37 AM Agree 0
    I am looking into these syndicated mortgages, I spoke to a FDS Brokers sales representative and I was told that this was a completely safe secured by property investment.

    I pulled the title of the property in question, Lake & East in Oakville and discovered that on the day of transfer 2 mortgages were put on title totaling 302% loan to value.

    I would love to hear how a property purchased the same day tripled in value to to secure my investment which is safe and guaranteed.

    Investors are being mislead and frankly just plain lied to. These are not safe and not secured.

    As the Barrie investors found out, these mortgages are not secured. They were wiped out in the bankruptcy.
  • David O'Gorman | 12 Apr 2016, 02:06 PM Agree 0
    Butler has hit the nail on the head. You can not compare syndicating a mortgage with you & your spouse or you & your RRSP, with the megalith syndications going on today.Sure you have a lien on the property, in your name, but subordinate to how many prior encumbrances? For what purpose? To finance soft costs of a commercial project. Check the people behind some of these syndications. Have any been issued a life time banned by any regulator
    Some of the syndications are paying an 8% finders fee to a brokerage for referring an investor, then paying the investor 8%. What is the borrower paying? who is taking the risk & who is earning the reward. Does your brokerage's E&O cover you if this mess goes belly-up & an investors sues the referring broker for any loss?
    Lots of questions & no answers
  • I agree with Ron Butler | 13 Apr 2016, 11:16 AM Agree 0
    Red Flags for Investors;
    Returns that are fixed
    "Guaranteed Returns"
    "Low Risk"
    Multi Million Dollar Subordinated Debt
    referral fees at 800 basis points 8 times the norm
    high pressure group meetings to influence investors (vs. one one with a professional)
    prior history with regulators (banned for life)
    A small sample of reasons to pause
  • Paul Mangion | 18 Apr 2016, 10:48 AM Agree 0
    I have done syndications for many years. The problem with some of these big groups is they seem to take on the risk that traditionally was taken by the developer. Some of these large groups are becoming the developer or partner without much risk to themselves. Agents have to start asking more questions and explaining risk better. Lenders should come first not the agents wallets.
  • Paul Mangion | 19 Apr 2016, 09:12 AM Agree 0
    Maybe agents should look at the projects and ask questions other than how much to I get paid. The agents that sell the stuff must also take some blame. If nobody sold the ultra risky stuff then no one would loose money.
  • Keith | 19 Apr 2016, 10:16 AM Agree 0
    I am not suggesting that there is no risk, there is ALWAYS risk - with any investment.

    As I said before, if Ron wants tighter restrictions on the large syndications, then I for one will be pushing for those same regulations to reflect on ALL - regardless of size.

    In fact, I believe that anyone who invests in a private mortgage deserves to have far greater disclosure and that all private lending should be much much much more closely regulated. Particularly when it is a mortgage broker doing the lending.

    I have seen many situations where the broker lends the client the money for down payment on a home and does not fully disclose that to the lender and does not register their second charge until after the banks mortgage is registered.

    Actually - that is a big thing with brokers, getting seconds and then not disclosing them to the first charge holder which they are required to do under the terms and conditions of the first charge.

    To not fully disclose is fraud.

    Now this is a can of worms that I think should be opened and is long overdue to be opened.

    I think that perhaps FSCO should be doing their job better and brokers who do this sort of thing... lose their license and a nice hefty fine of say around $50,000 per incident.
  • Michele Hall | 07 Sep 2016, 02:15 PM Agree 0
    I am not sure if anyone is still following this or where everything is sitting today, however I just had a second investor approach me about investments and she was recently approached by FORTRESS to invest in their syndicated mortgages. She was not aware of their issues and is still being sold false information and this is still not being regulated ??? What is going on here people ?
  • Rachelle | 07 Sep 2016, 04:21 PM Agree 0
    @Michele Hall

    I would suggest your friend pull title on the property and look at the loan to value before putting her money in.

    Like my 302% loan to value title for Lake & East, pull the title and decide if you are secured.

    I've done my homework on Fortress and friends don't let friends invest in Fortress but if there's someone you actively dislike you might want to slip them a brochure with all the guaranteed money they will make.

    I used this title search provider to do the title search on the project I was marketed. It costs $50 or so but better $50 than losing all your dough.

    These projects are not secured. The mortgages on the property are for more than they could be sold.

    Also if there's anything I've learned about investor protection in this country, it's that the people who are tasked with protecting investors from these criminals will cover their own ass all day long talking about due diligence while letting these people go free when they should be in jail.

    I hope to live to see the day when white collar crimes and the theft committed by these people is punished like any crime.
Post a reply