The Other F Word

I have 2 favourite F words…..One I drop quite a bit, and the other is fraud. Fraud has been our industry’s ( and Canada’s ) largest problem for a long time. We have all sat around and groaned and moaned about it. We, at least the good brokers, have all asked regulators to step in and do something.

Well, today the Ontario mortgage regulator finally did something! As I am sure most of you are aware they have levelled some very serious accusations against Bill Handsaeme and Forest City Funding. While I am always one to believe in the ‘ innocent until proven guilty’ mantra, I have also lost clients that were magically able to be helped by this outfit.

As many others have already said – these allegations were laid directly at the feet of Bill, and no other agents names were mentioned, so there is no indication that others were involved. Yes, true, but there also isn’t evidence that other brokers and agents WEREN’T involved. Forest City Funding has a little over 350 agents and brokers when all tallied up. That is a lot of people, and to think that only 1 single person was involved is pretty naive. For all I know there could even be some Forest City Funding people who read my blog.

However, I have never been one to change the message based on the audience. In fact, that is one of my pet peeves in life. Fraud is fraud, and I don’t care if you are my best friend, if you break the rules, you best be prepared to deal with the consequences.

The fraud involved using a private MIC ( also owned by the principal broker ) and using funds from that MIC as a down payment, writing a gift letter to say the down payment was a gift, when in fact it was borrowed money from the MIC. Pretty easy to do, but apparently also easy to figure out by the regulators. Of course, this is what we know about so far. Where a broker will commit one type of fraud, you cannot think they won’t commit another type of fraud. If you will forge a down payment document, is it really a stretch to say you would alter an income document?

This news is a big deal today, and will send some waves throughout the industry. However, I do not think today is the end. Today is the start of a long thread about to be pulled on. Once you involve a MIC which is regulated by an entirely different regulator, you will now not only have to worry about the Ontario mortgage Regulator in your business. Oh no, certainly not. FSRA talks regularly with other regulators across the financial space, and since a MIC is under the purview of the Ontario Securities Commission, you can expect them to start hanging around like a fat kid at a free hot dog giveaway. I will keep my personal opinions on the way the MIC was run to myself, since there has been nothing made public about it, nor any charges laid, however, there were issues with the way the MIC was administered from the securities side as well.

I feel extremely bad for any agents from this brokerage who were not involved. They are going to face a very large uphill battle in the court of public opinion, and in trying to find a new home for their license. Will other brokerages want to take agents on from this brokerage? Maybe, but at this stage it is tough to tell who was in on it, and who wasn’t. I have a lot of personal acquaintances that are there, and assuming they are not involved, my heart goes out to them. If they were involved, or knew about it and did nothing to stop it – well then you have what is coming.

I think though we have to really start thinking about the files and the people behind them. How many mortgages were funded based on fraud? How many do we know of, and how many are still out there that we don’t yet know of? Will the lenders call the mortgages of the files they now know were fraudulently obtained? I doubt it, but do we know? Will lenders blacklist agents that were known to have submitted fraudulent files? Are the clients even aware the mortgage they got was fraudulent? Was the client is on it, or were they told a story and lie to make it all look legit?

Forest City Funding was a very large brokerage, and funded over 2.2 Billion dollars of mortgages in 2022 on over 5000 files. They were a force, especially in the Southern Ontario market. Today has proven that FSRA is starting to finally grow a set of teeth. Finally we are seeing the regulator back up its threats with action. Finally the bad actors are being caught. While I am the first person to slam the regulator, I will also give them a standing ovation for this one. It’s about fucking time we did something to try and address the fraud that has been rampant in our business for a very long time.

Between the suspensions announced last month, and actions like today, FSRA is starting to show that they are here to be taken serious. This should come as welcome news to consumers, industry participants, lenders and society as a whole. For once we are starting to level the playing field of truth. Finally we can start to compete based on customer service, client education, and the like, rather than competing with someone who is playing with a different set of rules.

Today was a great day in Ontario, and if nothing else, I hope you are able to take away something from today’s article, and I hope it is the following:

FSRA has made is clear – if you choose to perform fraud, be prepared to get fucked!