London mortgage brokerage, dealer faces fines of $110K: Regulator

Article content material

A London firm that brokered practically 6,000 mortgages price greater than $2 billion in 2022 and its principal dealer face potential fines of $110,000 following a two-year investigation by Ontario’s monetary companies regulator.

The Financial Services Regulatory Authority of Ontario stated Tuesday it has began enforcement motion towards Forest City Funding Inc. and William Handsaeme.

Article content material

Article content material

The authority alleges the corporate gave “false or deceptive information and documents when dealing in mortgages” opposite to the the Mortgage Brokerages, Lenders and Administrators Act.

The firm is also alleged to have acted “when it ought to have known that by acting it was being used by a borrower to facilitate dishonesty,” the authority stated in a discover of proposal dated Feb 9, 2024.

Handsaeme, recognized by the authority as principal dealer and sole director of Forest City Funding, is alleged to have brought on the corporate to have interaction within the conduct the authority says violated the act.

Handsaeme didn’t reply to requests for remark.

Forest City Funding brokered 5,739 mortgages in 2022 with a complete worth of roughly $2.37 billion and sponsored 48 full-time mortgage brokers and 297 full-time mortgage brokers, the authority stated. The firm at 1 Commissioners Rd. East has been licensed since 2008.

The Financial Services Regulatory Authority of Ontario stated it performed in investigation of the corporate in 2022 and 2023.

The regulator stated it reviewed 5 transactions through which Forest City Funding organized the primary mortgage and an organization referred to as Solidity Group was the lender for the second mortgage.

Article content material

Article content material

“In all five of the transactions, (Forest City Funding) knowingly assisted the borrower in obtaining a second mortgage that contravened the terms and conditions of the first mortgage,” the authority stated.

In all 5 circumstances, the phrases of the primary mortgage prohibited secondary financing, the authority stated.

“As (Forest City Funding) arranged the first mortgages, (Forest City Funding) was aware of these terms of the first mortgages,” the authority stated.

Furthermore, the corporate additionally helped debtors get second mortgages, the authority stated.

“In doing so, (Forest City Funding) knowingly facilitated the borrowers violating the terms of the first mortgages,” the authority stated.

In 4 of the 5 transactions, the authority stated, the second mortgage was used to pay again supposedly “gifted” down funds, a violation of the phrases of the primary mortgage commitments.

“All of the first mortgage commitments contained a requirement that any funds provided for a down payment be gifted and not repayable,” the authority stated.

“As (Forest City Funding) arranged both the first and second mortgages it was aware of the terms of the first mortgage.”

Article content material

In the 4 transactions, Forest City Funding “deceptively submitted” a “gift letter” to the primary lender saying the funds for the downpayments have been non-repayable, the authority stated.

“Handsaeme admitted to (the Financial Services Regulatory Authority of Ontario) that the purpose of the second mortgages issued by Solidity Group was to repay family members who provided the short-term funds for a down payment for the first mortgage,” the authority stated.

In one of many transactions, a Forest City Funding mortgage agent loaned the borrower’s dad and mom $80,000, the authority stated.

“This $80,000 was then provided to the borrower, purportedly as a ‘gift,’ as reflected in the ‘gift letter’ (Forest City Funding) submitted to the lender,” the authority stated.

“On the close of the second mortgage, the mortgage agent was re-paid this $80,000 from the proceeds of the mortgage.”

Solidity Group, the lender for the second mortgages within the 5 transactions reviewed by the authority, funded 71 mortgages with a complete worth of about $26 million in 2022, the authority stated.

Handsaeme is president and one among two administrators of Solidity Group, the authority stated.

Article content material

Solidity Group listed charges on disclosure paperwork for the 5 second mortgages that included charges for an “insurance premium” and a “tax” on the insurance coverage premium that have been in truth further lender charges, the authority stated.

“The incorrect disclosure to borrowers relating to “insurance premiums” and “tax” brought on the annual share charge (APR) of the mortgages to be underreported, leading to an incorrectly disclosed cost of borrowing to the borrower,” the authority stated.

In one case, the annual share charge disclosed to debtors was 2.74 per cent whereas the approximate minimal precise APR was 13.54 per cent, the authority stated.

The Financial Services Regulatory Authority of Ontario says it proposes to droop Handsaeme’s mortgage dealer licence for one yr.

The regulator proposes to impose 10 administrative penalties totalling $100,000 on Forest City Lending and one administrative penalty of $10,000 on Handsaeme.

The firm and Handsaeme have requested a listening to in regards to the proposal earlier than the monetary companies tribunal, an unbiased adjudicative physique made up of 9 members, the authority stated. 

Article content material

The regulator’s web site lists Handsaeme because the principal dealer of Forest City Funding, working as Dominion Lending Centres FC Funding. His standing is “authorized to sell.”

Forest City Funding describes itself on its web site as an company that has 350 brokers who supply a “boutique approach to service.”

“Our goal at FC Funding is simple: to provide our clients with the best possible mortgage experience, and to empower our agents to succeed in the industry,” Handsaeme says. “We do this by putting people first, by fostering a culture of innovation, and by staying ahead of the curve in an ever-changing market.”

[email protected]

Article content material