'Know every single private lender personally,' advises broker

'Know every single private lender personally,' advises broker

In the wake of unscrupulous activity involving drug dealers and purported private lenders, one mortgage broker advises his peers to know exactly who they’re dealing with.

An explosive Globe and Mail article revealed money from Vancouver’s fentanyl trade is being laundered through real estate in the city, but, in the process, the article unwittingly implicated real private lenders. While there’s no reason to disbelieve the report, the article misrepresented money launderers as private lenders simply because the mortgages were issued as private loans.

In spite of the careless characterization, mortgage broker and partner at Champion Mortgage Doug Adlam has advice for his peers.

“As brokers in Ontario, we’re held to extremely high standards to ensure we know our investors, know our private lenders,” he said. “A tip I have to other people in the industry is, at our company we do private lending, and we’re very picky with the private lending we do, but we know every single one of our private lenders personally and know the business that they’re in. That protects us and that protects our clients so we know we’re not involved in any money laundering scheme or anything that’s deemed illegal.”

The malfeasance in Vancouver involved cash transactions, and Adlam says that alone should always be cause for circumspection. In fact, a private lender who’s unwilling to disclose their funds’ provenance is a red flag.

“Verify the source of the funds and make sure that it’s coming from a major Canadian financial institution. You should never ever, ever be involved in a mortgage transaction with actual cash. If it’s cash, run away—there’s no way it’s legitimate.”

Champion Mortgage receives frequent enquiries from private lenders expressing desire to partner with the brokerage, but passing the smell test isn’t as simple as they anticipate.

“Brokers are held to extremely high standard to ensure the loan is in the best interest of both the lender and the borrower, and we do our due diligence to ensure everything is above board,” said Adlam.

“We’ve been in business for a very long time and we get calls all year, every year, from potential private lenders who identify themselves as private lenders, and I ask them how they heard about us and who they know. When they say, ‘I found you online,” I say, ‘Thank you very much, but we’re not interested.’ We like to know our private lenders, and if we don’t know them we don’t like to lend out their money. To me, it just seems like a common sense business practice.”


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