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SHIFTING DYNAMICS
Benjamin Tal's insights p.28 COMMISSIONS
NAVIGATE CLIMATE RISK
Adapting business models p.8
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NAVIGATING CLIMATE RISK
Regulatory changes will require mortgage brokers to adapt BY CARLA GILES 26 features SPECIAL PULL-OUT SECTION: ALTERNATIVE LENDERS
Comprehensive listings of alternative lenders, mortgage investors, private lenders and syndicators across Canada
MORTGAGE SERVICES ACT
B.C. Mortgage Services Act: Bill 29’s impact on mortgage lenders BY GREG UMBACH AND JENISSA SUNDERJI
UNREGISTERED = UNPAID
Registration required to earn commissions BY RAY BASI
REGULATORS’ PUBLISHING OF ALLEGATIONS
Public protection or premature damage? BY RAY BASI
THE CURRENT ECONOMIC LANDSCAPE Benjamin Tal’s insights and perspectives BY CARLA GILES
Index Legal Ease: Lack of diligence and records can lead to significant suspension BY RAY BASI
the Clock: Konstantin Seroshtan channels his zest for adventure into a professional commitment to clients and community BY
VOLUME 9 ISSUE 4 FALL 2024
THE CANADIAN MORTGAGE BROKERS ASSOCIATION
DIRECTORS
Jim DeCoste (CMBA-Atlantic)
Deb White (CMBA-BC)
Taylor Lewis (CMBA-Ontario)
EXECUTIVE DIRECTOR
Carla Giles
CMBA - ATLANTIC
Mortgage Brokers Association of Atlantic Canada 12 M - 7095 Chebucto Road, Halifax, NS B3L 0A1
CMBA - BC
Mortgage Brokers Association of British Columbia 2025 Willingdon Ave, Suite 900, Burnaby, BC, V5C 0J3
CMBA - ONTARIO
Independent Mortgage Brokers Association of Ontario 7 - 40 Winges Road, Woodbridge, ON L4L 6B2
CMBA - QUEBEC L'Association des courtiers hypothecaires du Québec 5855 Taschereau #202, Brossard, QC J4Z 1A5
CANADIAN MORTGAGE BROKER magazine is produced by the Canadian Mortgage Brokers Association (CMBA National)
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STAFF WRITER
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MANAGING EDITOR
Kathleen Freimond
ART DIRECTOR
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BILLING AND SALES
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Carla Giles
Lisa Gordon Jenissa Sunderji
Greg Umbach
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NAVIGATING CLIMATE RISK IN THE MORTGAGE INDUSTRY
Regulatory changes will require mortgage brokers to proactively adapt their business models
BY CARLA GILES, MBA, CAE, CEO OF
Climate change is no longer a distant threat – it is a present and growing reality. Canada has witnessed increasingly frequent and severe weather events such as floods, wildfires and storms, all of which pose significant risks to property values and mortgage portfolios.
For the mortgage industry, understanding these changes and preparing for evolving regulations around climate risk management is crucial. Recent developments in the regulatory landscape, led by federal and provincial financial services authorities, are reshaping how climate risks are assessed and disclosed in decision-making. Mortgage professionals must now consider not only the financial health of their clients but also the resilience of the properties they help finance.
THE ROLE OF FINANCIAL INSTITUTIONS AND POLICYMAKERS
Financial institutions play a pivotal role in accelerating the adoption of sustainable financing and managing climate risk. By creating incentives for energy-efficient housing and investing in green solutions, financial institutions and mortgage lenders can contribute to a more resilient housing market. Moreover, policymakers are crucial in supporting these efforts through legislation and incentives that encourage green building practices, the necessary infrastructure and climate resilience. However, a coordinated approach is needed to ensure that stakeholders across the financial sector are aligned in promoting a more resilient financial system.
At the Principles for Responsible Investment conference (October, 2024), Deputy Prime Minister and Minister of Finance Chrystia Freeland announced plans to push forward sustainable finance. This includes the development of a made-in-Canada sustainable finance taxonomy, which aims to provide clear guidelines to identify “green” and “transition” investments. These guidelines will serve as a
foundation for classifying investments, helping institutions and investors understand where their capital can have the greatest impact on Canada’s climate goals.
The federal government also plans to introduce mandatory climaterelated financial disclosures for large, federally incorporated private companies, ensuring that capital allocation aligns with net-zero goals. By laying this groundwork, the government hopes to accelerate the flow of private capital into sustainable activities across the Canadian economy, which would also support the building of a stronger foundation for energy-efficient and climateresilient buildings across Canada.
WHY REGULATORY CHANGES MATTER TO THE MORTGAGE INDUSTRY
Regulatory changes are not just about compliance; they are designed to protect the financial system from climate-related shocks that could disrupt and affect financial stability and the economy. In response to these challenges, federal and provincial regulators are implementing changes to how climate risks are assessed and communicated. The Office of the Superintendent of Financial
Institutions (OSFI) has introduced Guideline B-15 to address the impact of climate-related risks on federally regulated financial institutions (FRFIs).
Guideline B-15 prompts financial institutions to proactively integrate climate risk management into their business strategies, governance frameworks and risk assessments. With these measures, OSFI aims to ensure that financial institutions are not only aware of climate risks but are also wellprepared to mitigate them.
At the provincial level, financial services regulators are taking similar steps to align the real estate and mortgage industry with climate risk considerations. Their initiatives will focus on equipping brokers with the knowledge and tools necessary to communicate these risks effectively to clients, while also ensuring that licensees have strong governance and risk management practices in place.
UNDERSTANDING CLIMATE RISK: THE NEW NORMAL FOR MORTGAGE PROFESSIONALS
The impact of climate change is becoming increasingly evident, with extreme weather events such as floods, wildfires and storms
CMBA-BC, MBIBC, EXECUTIVE DIRECTOR, CMBA NATIONAL
occurring more frequently and with greater severity. These developments pose significant risks to the housing market, directly affecting property values, insurability, and overall market stability. For the mortgage industry, the implications extend beyond environmental concerns –they represent financial challenges that require embedding climate risk management into decision-making.
Properties in high-risk areas are particularly vulnerable, facing a higher likelihood of depreciation as climate risks escalate. This creates a dual challenge for the industry: effectively assessing these risks and guiding clients to make informed decisions that protect their investments. Many homeowners and businesses are still unaware of practical measures they can take to mitigate climate-related damage, leaving them exposed to potential financial losses.
Adding to the complexity is the rising issue of insurability. Currently, an estimated 10 per cent of Canadian homes are uninsurable due to flood risks. Insurability is a key factor in securing a mortgage; properties that can’t be insured are at greater risk of losing market value and may become ineligible for financing. For mortgage professionals, addressing these concerns proactively is essential to managing risk and helping clients navigate an increasingly uncertain environment.
ECONOMIC AND MARKET RATIONALE FOR CLIMATE RISK MANAGEMENT
Embracing climate risk management offers clear economic benefits for the mortgage industry. Here are several compelling reasons why integrating these practices is critical:
1. Property depreciation: Homes in high-risk zones, such as those prone to flooding or wildfires, are more likely to depreciate in value. Failing to account for these risks leaves both lenders and clients exposed to financial
losses, which could be mitigated through strategic risk assessment and proactive measures.
2. Insurability Concerns: As climate risks grow, insurers are pulling back from covering properties in high-risk areas, leading to rising premiums. Uninsurable homes face sharp declines in market value, and homeowners may struggle to secure mortgages. By considering insurability in lending decisions, brokers can help clients avoid properties that could become uninsurable in the future.
3. Regulatory Compliance: Financial regulators are increasingly emphasizing the importance of accounting for climate risks. In Canada OSFI has issued guidelines to manage climate risk within financial portfolios. By staying proactive, brokers can anticipate regulatory shifts and position themselves as leaders in sustainable finance, reducing future compliance risks. Integrating climate risk into underwriting practices is crucial to protect both homeowners and the broader financial system, support ing a more resilient housing market in Canada.
ADAPTING TO THE NEW REALITY: PRACTICAL STEPS FOR BROKERS
With these regulatory changes, mortgage brokers need to be proactive in adapting their business models. Here are some practical steps to consider:
• Stay informed on regulatory updates: Keep up to date with changes at both the federal and provincial levels, particularly around climate risk disclosures and energy efficiency standards. Monitoring guidelines from OSFI, BCFSA, FSRA and other regulators will help brokers stay compliant and proactive.
with clients, especially those purchasing in high-risk regions. Offering clear, actionable guidance goes a long way in building trust and protecting investments.
• Leverage green financing options: Incorporate green mortgage products into services and collaborate with lenders to understand the benefits and incentives available for energy-efficient homes.
• Build strong ties with lenders and insurers: Working closely with insurers and lenders to understand their criteria for assessing climate risks will ensure that clients are informed of potential impacts on insurability and mortgage terms.
PREPARING FOR CHANGE
As the housing market increasingly incorporates climate risk management, mortgage brokers will play a critical role in guiding clients through these changes. While provincial regulators are still refining how these obligations will be formally implemented, one thing is certain: this shift presents a unique opportunity for mortgage brokers to build trust and strengthen credibility with clients in an evolving and uncertain environment.
By staying up to date on regulatory developments and promoting sustainable financing options, brokers can position themselves to manage these changes effectively. Those who adapt early will be better equipped to succeed as the market evolves toward sustainable finance.
This is an important moment for the mortgage industry to support
• Educate clients on climate risks: Discuss climate-related risks
MORTGAGE SERVICES ACT: BRITISH COLUMBIA
Bill 29’s impact on mortgage lenders
BY GREG UMBACH AND JENISSA SUNDERJI
British Columbia’s Bill 29 repeals the Mortgage Brokers Act and replaces it with the Mortgage Services Act (MSA). The MSA establishes a licensing and regulatory regime for mortgage brokerages, principal brokers and mortgage lenders. While the majority of the MSA is not yet in force, the Bill will significantly impact non-institutional and nonCanadian mortgage lenders.
The Bill was written largely in response to the 2022 Commission of Inquiry into Money Laundering in British Columbia (the Cullen Report). The MSA is set to replace the Mortgage Brokers Act, R.S.B.C. 1996, c. 313, which came under scrutiny in the Cullen Report and is considered outdated and insufficient to address modern concerns.
SUMMARY
The MSA establishes a licensing regime for mortgage lenders. The specific impact of the MSA on mortgage lenders depends on rules that have not yet been enacted. The MSA imposes a registration requirement on mortgage lenders who are not otherwise exempt, affecting individuals and non-Canadian lenders in particular. If the rules follow the pattern set for mortgage brokers, they may impose education and experience qualifications and some form of background check on applicants. The B.C. Financial Services Authority (BCFSA) will be responsible for administering the MSA.
RECOMMENDATIONS FROM THE CULLEN REPORT
Recommendation 29 from the Cullen Report suggests that “the Province enact legislation directed at private mortgage lenders providing for registration, oversight, and enforcement. This regime should be separate from the scheme applicable to those engaged in brokering loans.”
While the recommendation suggests that the legislation regulating mortgage lenders be separate from legislation pertaining to mortgage brokers, that was not the end result. The reasoning for the change (according to the debate in the legislature) was that including private lenders in the MSA was intended to leverage the Real Estate Services Act licensing model. Merging the regulation of mortgage lenders with mortgage brokers and principal brokers was also seen as a way to avoid legislative gaps and minimize lenders’ regulatory burdens.
REGISTRATION REQUIREMENTS FOR MORTGAGE LENDERS
Section 3(3) of the MSA states that a person must not provide mortgage services or mortgage lending unless the person is licensed as a mortgage lender, mortgage brokerage,
The Real Estate Services Act rules may be used as an indicator of what the BCFSA may require. These rules currently consist of educational requirements, background checks and experience requirements of between 2 to 5 years for individuals.
principal broker or mortgage broker, or is exempted. These services include taking a mortgage over real property in British Columbia.
Section 4 of the MSA provides, in part, that the following are exempt from this licensing requirement:
a. insurance companies
b. savings institutions
c. a director, officer or employee of a person referred to in paragraph (a) or (b), in respect of mortgage services provided on behalf of that person
While “insurance company” and “savings institution” are not defined in the MSA, “insurance company” is defined in the Interpretation Act (B.C.) as an insurance company that is authorized under the Financial Institutions Act (B.C.) and “savings institution” is defined as a bank, credit union, extraprovincial trust corporation or subsidiary of a bank that is a loan company subject to the Trust and Loan Companies Act (Canada). A bank is further defined as a bank to which the Bank Act (Canada) applies. These two definitions are of concern for non-Canadian lender insurance companies or banks lending into British Columbia on the security of a mortgage. It is common for a non-Canadian bank or other lender to take security over Canadian real property in a larger multi-jurisdictional financing where such lender may not be governed by these Canadian statutes. For example, several United States banks have Canadian branch offices or subsidiaries authorized under the Bank Act as foreign banks, but these U.S. banks may not use the Canadian-authorized subsidiary to take the mortgage security, which consequently raises the concern of whether this would require them to become registered under the MSA. Many non-Canadian banks, insurance companies and their subsidiaries are
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not registered or authorized under the Bank Act or Financial Institutions Act but, in any event, can otherwise legally take a mortgage over real property in B.C. as security for a loan. Of course, individual lenders, whether they are Canadian or non-Canadian, will typically be caught by the licensing requirements of the MSA as they are not exempt.
Licence Qualifications and Applications
Section 14 of the MSA sets out the basic process to apply for a licence or for the renewal, amendment or reinstatement of one. The form and manner, as well as the specific information required for the application, are left to be developed by the superintendent at the BCFSA. The applicant must also provide “any prescribed fee in relation to” the application and licence. These details are to be developed by the BCFSA as part of the rules under the MSA and have not yet been released.
Section 15 of the MSA outlines the qualifications for obtaining a licence. However, it does not provide details regarding the application for a mortgage lender licence beyond stating that the applicant must satisfy the superintendent that the applicant meets the qualification requirements established by the rules. Section 63 states the B.C. Financial Services Authority (BCFSA) may make rules that it considers necessary or advisable respecting licensing or regulating licensees for the provision of mortgage services. This can include rules concerning the education, experience or other qualifications of a person to obtain or renew a licence, including rules conferring discretion to determine equivalent qualifications. While there are no rules made yet, the MSA is compared several times to, and described as being modelled after, the Real Estate Services Act The Real Estate Services Act rules may be used as an indicator of what the BCFSA may require. These rules currently consist of educational requirements,
background checks and experience requirements of between 2 to 5 years for individuals. It is unclear what other requirements the BCFSA may impose on lenders required to become licensed under the MSA.
Temporary Licences
Section 19 permits the superintendent to issue a temporary licence. In this case, the licence would require the licensee to meet one or more specified conditions within a specified period of time or by a specified date. The licence is cancelled if they do not meet these specified requirements by such time.
FAILURE TO OBTAIN A LICENCE
Failure to be Licensed
Section 6 states that if a person fails to be licensed or if there is an irregularity in a person’s application for a new licence or application for renewal, amendment or reinstatement, a mortgage will not be rendered void, voidable or unenforceable.
Refusal to Issue a Licence or Renew Licence
Under Section 15, the superintendent can refuse to issue a licence if the applicant does not meet the aforementioned qualifications. However, before refusal, the superintendent must give notice to the applicant and provide the applicant with an opportunity to be heard on the matter. If the application is refused, the superintendent must provide a written notice of refusal with reasons for the refusal and advise of the right to appeal under Division 6 (Appeals to Financial Services Tribunal). Section 20 allows the superintendent to impose conditions or restrictions on a licence. However, they must provide notice and reasoning to the applicant in the same manner as a refusal.
OFFENCES
Section 66 outlines the offences. Anyone who contravenes Section 3(3) (i.e., the requirement to hold a licence for mortgage lending) commits an offence.
Under Section 15, the superintendent can refuse to issue a licence if the applicant does not meet the aforementioned qualifications. However, before refusal, the superintendent must give notice to the applicant and provide the applicant with an opportunity to be heard on the matter.
For additional background, see Canadian Mortgage Broker Spring 2024, page 38.
In addition, anyone who contravenes Section 34 (wrongful taking), Section 35 (deceptive dealing), and Section 39 (interference with investigation) commits an offence. A person who authorizes, permits or acquiesces in the commission of an offence also commits an offence. Section 67 provides the penalties for an offence. A corporation is liable on a first conviction to a fine of up to C$1.25-million and on the second conviction to a fine of up to C$2.5-million. An individual is liable for the same fines or imprisonment for up to two years, or both. The limitation period for commencing prosecution is six years after the date the superintendent first became aware of the facts on which the prosecution is based.
BCFSA AND CREATING RULES
Sections 63 and 64 of the MSA permit the BCFSA to create rules for the administration of the MSA; however, before making, amending or appealing a rule, the BCFSA must publish the proposed rule for public comment, obtain the minister’s consent and comply with the procedures and requirements outlined in the regulations. These rules and process for licensing have not yet been released by the BCFSA. These rules and the resulting process for registration with the BCFSA will have significant impact on private and non-Canadian institutional mortgage lenders in British Columbia once they are effective. We encourage lenders to discuss with their legal counsel whether they will be required to register under this new process early in the loan transaction.
This article is republished with permission of Blakes a leading Canadian law firm with offices in Toronto, Calgary, Vancouver, Montréal, Ottawa, New York and London. Greg Umbach is a partner, Vancouver; Jenissa Sunderji contributed as a summer law student. More information: blakes.com
Registration required to earn commissions
BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC
UNREGISTERED
= UNPAID
Note: This article uses the generic terms “brokerage” and “broker” instead of the British Columbiaspecific terms “mortgage broker” and “submortgage broker.”
THE ISSUE
Does a brokerage have to pay commissions to someone who presents themselves as a broker, is hired, works on files that generate commissions, and is later found to have known they were not registered at the time of generating the commissions? Stewart v. National Equity Lending Corp., 2024 BCCRT 727 (CanLII) provides some guidance.
WHAT HAPPENED?
On October 15, 2021, the brokerage hired a broker to facilitate mortgages. He was to, pursuant to the contract they signed, receive commissions for doing so.
In December 2021, the regulator advised the broker that his registration had been transferred to the brokerage in error and that he was not permitted to conduct brokering business until the issue was resolved. Despite being aware of his unregistered status, the broker continued to facilitate loans for the brokerage, including five loans in May 2022.
It was not until June 1, 2022, that an employee of the brokerage, when corresponding with the regulator, learned that the broker was not registered. The regulator advised the brokerage that the broker was facing a “suitability review” and the regulator had received, but not completed, the transfer request due to the outstanding review.
On June 2, 2024, the brokerage terminated its agreement with the broker, citing the broker’s unregistered status as the reason for doing so. After the termination, the brokerage continued to correspond with the broker to conclude the in-progress loans without impacting the clients. It also asked the broker to adjust and update forms.
THE DISPUTE
The broker claimed that the brokerage owed him the outstanding commissions pursuant to their contract. The contract contained a clause providing that the brokerage, if terminating the broker, was to pay him full compensation for any completed transactions and 80 per cent of the compensation for any transactions with outstanding conditions.
The brokerage’s position was that the regulations prohibit it from paying commissions to an unregistered broker.
DECISION
Brokerages and brokers are governed by the Mortgage Brokers Act (MBA). Section 21 of the MBA prohibits a person from acting as a broker unless registered under the MBA. Because of the broker’s unregistered status, the contract was illegal. The BC Supreme Court in Lotusland Estates Ltd. v. Ali, 2002 BCSC 131 summarized the factors to consider when deciding whether to enforce an illegal contract. (In that case, the Court decided the
homeowner could not escape paying the contractor on the basis that the suite being built was illegal in the sense it was contrary to zoning bylaws.) The factors are:
a. The relative merits of the parties’ positions.
b. The purpose of the statute and the policy on which it is founded.
c. Whether the statute contains the consequences of illegality.
d. Whether the voiding of the illegal contract results in a penalty that is disproportionate to the statutory breach.
The broker’s position was concluded to be weaker than the brokerage’s position. Considerable weight was placed on factor ‘b' above. The MBA’s purpose is to regulate brokerages and brokers. Professional regulation exists to protect consumers from unqualified and unscrupulous persons. There is a strong public policy reason not to permit unregistered persons to perform business. While the broker had previously been registered, he was not registered when the commissions were earned, was facing a suitability review, and was aware of his unregistered status. If the contract is enforced, the broker benefits from breaking the law. If the contract is not enforced, he is not paid commissions for five files. The penalty is proportionate to the broker’s breach of the regulatory statute. The broker knowingly continued to act as a broker despite being unregistered to do so. The value he would receive from enforcing the contract is directly connected to the unauthorized work he did.
Test
Having considered all four factors, the contract was found to be unenforceable.
A CLOSING THOUGHT
It seems unreasonable that the regulator, when advising the broker of the registration error and his non-registered status, would not have provided the same information to the brokerage. The brokerage could then have terminated the broker immediately and avoided the dispute, and the public would have been protected from the services of an unregistered broker.
This article is not intended as legal advice. You are advised to obtain legal advice in specific instances.
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SIDELINED
Note: This article uses the generic terms ‘brokerage’ and ‘broker’ instead of the British Columbiaspecific terms ‘mortgage broker’ and ‘submortgage broker.’
LACK OF DILIGENCE AND RECORDS CAN LEAD TO SIGNIFICANT SUSPENSION
BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC
THE ISSUE
What is a reasonable penalty for a broker who failed to use due diligence when providing records to a lender and failed to securely store files? JL v Registrar of Mortgage Brokers, 2024 BCFST 1 (CanLII) provides a reference point.
WHAT HAPPENED?
While investigating the mortgage broker’s activities, the Registrar discovered six deals of concern involving four borrowers. The Registrar issued a Notice of Hearing setting out the following allegations against the broker.
The broker conducted mortgage business in British Columbia in a manner prejudicial to the public interest, contrary to the Mortgage Brokers Act by:
• failing to use reasonable due diligence when verifying the accuracy of income and documentation she submitted to lenders. For instance, the broker determined a borrower’s stated business income by summing deposits in the borrower’s account without corresponding invoices or documentation to support the deposits.
• submitting inaccurate information in support of the borrowers’ income. For example, she submitted altered Notices of Assessment and T1s where she knew or ought to have known that the documents were altered or did not represent the true income of the borrower. As well, she submitted inflated income and rent information when she knew the actual income was less; and she submitted higher rent information to lenders when she knew the actual rent income was less.
• providing misleading or false information to lenders. For example, she provided conflicting information on mortgage applications made for the same borrower to different lenders. She falsely claimed the subject property would be owner-occupied when in fact it would not be and she provided conflicting rental information. She provided two lease agreements she knew or ought to have known were not authentic.
The broker could not provide the required records, violating the Mortgage Broker Act regulations, which mandate proper record-keeping. She stored her mortgage records on a hard drive in her friend’s garage, where a fire destroyed some of the files. Notably, the friend had multiple criminal charges, including drug trafficking. The broker acknowledged that this was not a secure location for storing confidential records. Additionally, she could not provide text correspondence with her clients because she had changed phones twice without saving the messages.
After the broker admitted to these allegations, the Registrar imposed a 24-month suspension, a $30,000 administrative penalty and investigative costs totalling nearly $14,000.
RESIDENTIAL COMMERCIAL CONSTRUCTION DEVELOPMENT LAND
The broker appealed only the 24-month suspension, claiming it to be disproportionately harsh, punitive and unreasonable.
THE 24-MONTH SUSPENSION
The appeal decision was based on the following analysis. In overseeing the mortgage marketplace, the Registrar must balance the need to maintain public confidence in the system and protect the public from harm.
Sanctions in professional regulation aim to protect the public, not to punish or denounce. The primary purpose of penalizing professionals for misconduct is to prevent future misconduct by both the individual and others subject to the same regulatory standards.
Four factors used to determine an appropriate penalty are: the nature, gravity and consequences of the conduct; the character and professional conduct record of the broker; whether the broker acknowledged the misconduct and took remedial action; and maintaining public confidence in the profession (including public confidence in the disciplinary process).
The following are mitigating factors in this case. There was no evidence that the broker’s misconduct caused specific harm to either the lenders or the clients. The broker had no prior discipline history. The broker continued to work in the industry as a broker and no further disciplinary issues were raised. There was no pattern of ongoing misconduct.
However, in many instances, the broker acted in a manner that was knowingly and deliberately false and/or misleading. Mortgage brokers play a critical role in ensuring the accuracy of information submitted to lenders, who rely on this accuracy in their lending decisions.
CONCLUSION
Given the number of transactions involved and the severity of the broker’s misconduct, a significant sanction was warranted. The 24-month suspension was consistent with other cases and designed to ensure future compliance with regulatory requirements. It is not a punitive penalty but will encourage compliance with regulatory requirements.
The appeal decision came to the following conclusion. A 24-month suspension is within the range of acceptable outcomes based on prior cases. It is appropriate and reasonable.
This article is not intended as legal advice. You are advised to obtain legal advice in specific instances.
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RIDING THE LOWS AND HIGHS
From wing-walking to scuba diving, mortgage broker Konstantin Seroshtan channels his zest for adventure into a professional commitment to clients and community
BY LISA GORDON
Imagine yourself standing on the top wing of a biplane while the pilot manoeuvres the aircraft into a roll or a loop. G-force pushes against your body and the drone of the propeller is in your ear, while you try to calm your mind and quell your anxiety. It’s a long way from the office, but mortgage broker Konstantin Seroshtan says wing-walking is not as much about the adrenaline as it is about “controlling the mind and body.”
The adventurous mortgage professional says he believes in constantly testing one’s self – in fact, that’s part of the reason he tried wing-walking. The exciting and unusual pursuit fits right into Seroshtan’s commitment to strong mental and physical health.
In his day job, Seroshtan is a mortgage broker with Tango Financial, a national brokerage with hundreds of agents. In Kelowna, B.C., he mentors a new broker while working alongside a 30-year industry veteran. It’s an occupation he loves, prompted by a career change back in 2020, when the former automotive sales and finance professional made the decision to join the mortgage profession.
“As COVID happened, I decided it was the right time for me to make a change,” he explained.
That change was partly fueled by the drive to and from the car dealership where he was working. Seroshtan recalls noticing a lot of new home construction during his daily commute, which started him thinking about how people will always need help with home buying and financing. As the owner of two properties, he admitted that at the time, he knew very little about how mortgages worked. A new career in mortgage brokering felt like the right move.
the unknown waters of mortgage brokering.
But jumping into a new experience is nothing new to Seroshtan, who is also an avid scuba diver.
“I like scuba diving around the world, from South America to Mexico, Cuba, Australia, Bali, and Hawaii – so I’m not only up in the sky, but under the water as well.”
He enjoys the calm and quiet of the underwater world. While he appreciates the natural beauty beneath the surface, Seroshtan said the opportunity to be at one with his thoughts, and the serenity it brings, is just as important.
And, when he isn’t under the water, you may find him wake surfing across it. “The last couple
Seroshtan stays busy with charitable work. He donates plasma regularly and helps out at the local food bank. The country has seen a spike in food bank usage over the past couple of years, and “if I can donate my time and energy to help, I am glad to,” he said.
At Christimastime, some families struggle to afford toys for their kids or to even put food on the table. Seroshtan rolls up his sleeves to help a number of different charities who aim to give families in need a better holiday season. “Hopefully, they will enjoy Christmas a little more by having at least the necessities and a little extra under the tree for their children.”
Seroshtan sees his Kelowna mortgage brokerage expanding in the future. He feels the industry offers good opportunity, and growth would increase their geographical territory so they could help more borrowers. For himself, he believes that expansion would allow him to focus on other areas.
of years, I really got into wake surfing; it helps me relax and recharge,” he said.
Unlike wakeboarding, where the user holds a boat-towed rope throughout the duration, wake surfers release the rope to ride out the boat’s wake. It’s a lot like surfing the ocean’s waves, noted Seroshtan.
“I saw it as an opportunity to help people, whether it be first-time buyers, or investors like myself.”
His new career in mortgages would ultimately allow him more time to pursue some of his personal interests and high-flying hobbies. The ability to work remotely suited Seroshtan’s professional and personal goals better – and now, with four years of experience in the industry, he couldn’t be happier that he dove into
A former director on the CMBA-BC board, Seroshtan feels the need to give back to his community as well as the mortgage industry. Motionball, a national non-profit that empowers young Canadians to be leaders in their communities by raising funds and awareness for Special Olympics, is just one organization he supports. “Different teams fundraise prior to the event and then they get to participate in a variety of activities alongside Special Olympic athletes. That’s a big part of what I do,” he explained.
“Having a better support structure will free up some of my time, so I can concentrate on the most crucial aspects and work less on the administrative side of the business.”
As the brokerage grows, it’s likely to encounter at least some turbulence from fluctuating interest rates, and perhaps the current shortage of affordable housing will also generate some waves. Either way, Seroshtan is prepared to ride it out – whether he’s soaring through an industry boom, or exploring more subtle opportunities that lie just beneath the surface.
This interview with Konstantin Seroshtan continues our series Brokers off the Clock. In every issue, we ask a mortgage broker to tell us what they like to do when they’re not behind a desk. Be it working with animals, travelling to exotic places or being involved with sports, we want to know how you unwind. Would you like to be profiled in a future edition – or suggest a fellow mortgage broker?
Contact info@cmba-achc.ca
REGULATORS’ PUBLISHING OF ALLEGATIONS M
Public protection or premature damage?
BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC
any regulators in the mortgage broker industry publish formal documents containing allegations against a registrant or licensee as part of their discipline and enforcement processes.
Often, this information is made public before the process is complete, and in some cases right at the beginning of the process. While this can promote transparency and public protection, it can also potentially cause lasting harm to the licensee (including to their reputation) even if the claims are later withdrawn or dismissed. Ontario’s Supreme Court addressed this issue in Harold the Mortgage Closer Inc. v. Ontario (Financial Services Regulatory Authority, Chief Executive Officer), 2024 ONSC 4464 (CanLII).
In the Harold case, the regulator published a Notice of Proposal on its website outlining allegations and a proposed order to revoke and deny the renewal of the broker’s licence, along with an administrative penalty. The key allegations were:
• that the licensee provided false information on his renewal application;
• concerns about the licensee, including honesty and integrity, were raised in two previous civil court proceedings;
unreasonable. The licensee asked the regulator to publish the Request for Hearing, but the regulator declined. However, two months after the Notice of Proposal was posted, the regulator updated its website to state that the Request for Hearing could be obtained by email request.
In Court, the licensee challenged the transparency policy and the publication of the Notice of Proposal. Alternatively, he sought to have the Request for Hearing published in the same manner as the Notice of Proposal, arguing that true transparency required it.
The Court concluded that, while the licensee has an interest in his reputation, the regulator's publication of allegations did not affect the licensee’s legal rights, interests, property, privileges or liberty. The publication was an administrative action, not a statutory power, and therefore there was no decision for the Court to review. The transparency guideline merely describes how and when the regulator will publish documents related to its enforcement proceedings, and it aligns with the practices of other regulators.
READ ALL ABOUT IT
• the licensee and his brokerage company gave incomplete responses during a regulatory investigation; and
• the licensee failed to attend an examination under oath despite being summoned under the Mortgage Brokers, Lenders and Administrators Act.
The Notice of Proposal stated that the document contained allegations that may be subject to proof at a hearing. The publication followed the regulator’s transparency guideline that mandates automatic publication, with a few exceptions.
The licensee filed a Request for Hearing, disputing the allegations in detail. He argued that the Notice of Proposal was unfair and defamatory, as it included allegations that were incomplete, misleading and
The Court also found that the decisions regarding publication were reasonable, noting that:
• the practice aligns with other regulators, which also publish enforcement actions prior to adjudication;
• the Notice of Proposal clearly indicated that the allegations were still subject to proof;
• there was a statutory remedy – an independent tribunal hearing – where the allegations could be disputed;
• publishing the licensee’s responding document could be inappropriate, as it may contain inaccurate or objectionable material;
• the decisions did not compromise the registrant’s right to procedural fairness in the tribunal hearing; and
• the licensee retained the right to appeal the tribunal’s hearing decision to the court.
In summary, the Court concluded that the interests in publishing the Notice of Proposal outweighed the licensee’s interests in not having it published, procedural fairness for the licensee was not compromised by the publication, and publishing the Request for Hearing could be inappropriate.
This article is not intended as legal advice. You are advised to obtain legal advice in specific instances.
THE CURRENT ECONOMIC LANDSCAPE
Benjamin Tal’s insights and perspectives
BY CARLA GILES, MBA, CAE, CEO OF CMBA-BC, MBIBC, EXECUTIVE DIRECTOR, CMBA NATIONAL
The mortgage industry is heavily influenced by interest rates, market trends and economic shifts. With so much happening, it is valuable to turn to experts for insight into where we are and where we are headed.
Recently, Benjamin Tal, Managing Director and Deputy Chief Economist of CIBC Capital Markets, provided key insights in a webinar organized by the Canadian Mortgage Brokers Association – British Columbia (CMBA-BC). Tal offered a clear, and sometimes surprising, perspective on Canada's economic landscape. Here is what mortgage brokers need to know.
BAD NEWS IS ACTUALLY GOOD NEWS
The first point Tal made was that bad news might actually be good news in today’s economy. The paradoxical state of affairs means that weaker economic indicators, such as a slowing labour market or stagnant growth, might be exactly what the Bank of Canada is aiming for.
Why? Because these indicators suggest that inflationary pressures are easing, which would provide the Bank of Canada with the opportunity to cut interest rates sooner rather than later. Inflation, as Tal highlighted, is already well under control—potentially even below the Bank's 2 per cent target when measured accurately. Tal emphasized that while the headline economic numbers might suggest Canada is not in a recession, the reality is different when examined on a per capita basis. Over the last five consecutive quarters, Canada’s per capita GDP has declined by 2.5 per cent, nearing levels seen during the recessions of 1991 and 2008. This indicates that Canada is currently experiencing a ‘per capita recession,’ a serious economic condition that has been masked by rapid population growth and indicates underlying economic weakness.
While hearing about a ‘per capita recession’ might sound concerning, Tal argues that these signals are paving the way for lower interest rates – a development that could provide relief to homeowners and stimulate more activity in the housing market.
INTEREST RATES: CUTS AHEAD?
Tal emphasized that the Bank of Canada has likely overshot with its rate hikes, and that significant cuts could be forthcoming.
He noted the inclusion of mortgage interest payments in the calculation of inflation is problematic and. that this practice, which is unique to Canada and Iceland, artificially inflates reported inflation rates and complicates monetary policy. According to Tal, the higher mortgage interest costs driven by increased interest rates should not be viewed as inflationary, as they ultimately suppress consumer spending and reduce economic activity.
He expects the overnight rate to decline to somewhere around 2.5 per cent by the end of 2025. However, he also cautioned that brokers should not expect the five-year rate to fall as dramatically; that rate is already pricing in a more stable environment and may only drop by another 25 to 40 basis points.
What does this mean for clients? Tal suggests that 2025 will be a transitional year – interest rates will start to decline, but the real impact will be felt in 2026, when rates will likely be low enough to encourage stronger market activity. Clients holding variable rates might want to look at shorter-term products to bridge until stability returns.
THE HOUSING MARKET: A TALE OF TWO SEGMENTS
Tal presented a divided picture of the housing market. The low-rise segment is relatively stable – not booming, but balanced between buyers and sellers. In contrast, the high-rise condominium market is facing more serious challenges. Tal describes it as “frozen,” with investor activity down, new construction stalled, and many existing units sitting vacant or not moving in the resale market. He predicts that the high-rise housing market will remain a buyer’s market for the next one to two years until excess inventory is absorbed. After that, however, prices could rise again as demand returns and new supply lags behind.
For brokers, this means there may be opportunities to help clients negotiate well-priced condos over the next year or two – but also a need to prepare for an eventual uptick in pricing once this lull has passed.
A NEED FOR HOUSING SUPPLY
A recurring theme in Tal’s presentation was the lack of appropriate housing supply. The surge in immigration over recent years has put tremendous pressure on an already constrained housing supply. According to Tal, the government failed to plan adequately for this influx, particularly in terms of rental units and affordable housing.
The rapid increase in population, especially through non-permanent residents, was not matched with adequate planning in terms of infrastructure and housing development. This mismatch has left municipalities struggling to keep up with housing needs, highlighting the urgent need for proactive supply-side measures. The resulting shortage of housing options had led to declining affordability and rising rents in the rental market.
Demand-side measures alone will not solve the affordability crisis; boosting supply is the real answer. Tal emphasized that focusing on providing incentives for rental construction and removing barriers for developers will have a much greater impact on the market compared to restrictive regulations.
RECENT MORTGAGE RULES CHANGES
During the webinar, Tal addressed recent federal changes to mortgage rules and their impact on the market. He discussed the expansion of eligibility for 30-year amortizations for insured mortgages to first-time homebuyers and all purchasers of new builds and increasing the $1 million price cap for insured mortgages to $1.5 million. He noted that while these changes are beneficial, they are not a game changer for the market. The adjustments might help at the margins, but they will not
Demand-side measures alone will not solve the affordability crisis; boosting supply is the real answer. Tal emphasized that focusing on providing incentives for rental construction and removing barriers for developers will have a much greater impact on the market compared to restrictive regulations.
significantly alter the overall affordability landscape or solve the supply issues plaguing the housing market. For mortgage brokers, it is essential to understand how regulatory changes could impact their clients, affect their buying power and market opportunities. Additionally, educating clients on the broader economic context will help them make informed decisions in this challenging environment.
HOW SHOULD BROKERS RESPOND?
As we look ahead, Tal’s insights offer a few practical takeaways for mortgage brokers:
1. Prepare Clients for Interest Rate Changes: Interest rates are likely to come down, but the timeline is important. Brokers should help clients develop a strategy that considers both short-term and long-term scenarios, especially for those holding variable-rate mortgages.
2. Identify Opportunities in the Condo Market: The condominium segment presents a buying opportunity over the next year or two. This might be the time to encourage clients looking for an investment property or a first home to enter the market.
3. Advocate for Supply Solutions: The industry needs to advocate for policy measures that address housing supply–whether it is rental or owned units. Increasing housing supply is the only effective solution to address affordability challenges.
THE ROAD AHEAD
In summary, Tal's outlook suggests that while Canada is experiencing an economic slowdown, this is not necessarily a negative development for mortgage brokers or their clients. With interest rates likely to decline, the economy is setting up for more favourable conditions, but patience will be required. The housing market may be challenging now, but the pieces are in place for recovery and potential growth over the next few years. For mortgage brokers, staying informed and ready to advise clients on these shifting dynamics will be key to navigating this complex landscape.
