The Canadian Mortgage Broker Magazine - Summer 2023

SOCIAL MEDIA MARKETING

RISING STRESS LEVELS

Are provincial borders

hard lines? p.18

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features

INTERPROVINCIAL MORTGAGE BROKERING

Are provincial borders regulatory hard lines?

BY RAY BASI

10

AT YOUR (VIRTUAL) SERVICE

Young mortgage brokers find success through the power of online community, building their brand –and their business – one post at a time

BY LISA GORDON

32

ORIGINAL VS. ELECTRONIC SIGNATURES

34 38 42

Are electronic signatures as legally enforceable as handwritten ones? BY JORDAN MARIO

BALANCING THE BUSINESS

Manage your personal well-being

BY SHERILEE BAKER

JUTRAS

STRATA DEPRECIATION REPORTS

What you see may not be what you get when lending on a strata property BY RAY BASI

NAVIGATING THE MAZE OF AI REGULATIONS

Tips for preparing your business compliance programs

BY GEORGE R. WRAY, STELA HIMA BAILEY, ELIOT ESCALONA

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VOLUME 8 ISSUE 3 SUMMER 2023

THE CANADIAN MORTGAGE BROKERS ASSOCIATION

DIRECTORS

Terry Kilakos (CMBA-Quebec)

Sadiq Boodoo (CMBA-Ontario)

Jim DeCoste (CMBA-Atlantic)

Sachin Varma (CMBA-BC)

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

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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)

EDITOR

Carla Giles

STAFF WRITER

Ray Basi

MANAGING EDITOR

Kathleen Freimond

ART DIRECTOR

Scott Laing

BILLING AND SALES

Debra Hiller

CONTRIBUTORS

Stela Hima Bailey

Sherilee Baker

Ray Basi

Eliot Escalona

Carla Giles

Lisa Gordon

Jordan Mario Jutras

George R. Wray

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Homeowners’ escalating financial challenges

RISING STRESS LEVELS

BY CARLA GILES, CHIEF EXECUTIVE OFFICER, CMBA-BC AND MBIBC; CO-EXECUTIVE DIRECTOR CMBA

ver the past year, the Bank of Canada has been waging a relentless battle against inflation, aiming to maintain a stable economy and protect the purchasing power of the Canadian dollar. However, these measures have placed significant financial stress on homeowners nationwide as they grapple with rising mortgage payments. The latest interest rate hike has increased pressure on indebted Canadians, making homeownership affordability a growing concern.

A recent report from the Financial Consumer Agency of Canada (FCAC) sheds light on the escalating financial challenges experienced by homeowners and renters over the past three years. The survey focused on three groups: homeowners with mortgages, homeowners without mortgages, and renters.

According to the FCAC report, 35.5 per cent of Canadians currently hold a mortgage, and many are struggling to make ends meet. Two-thirds of mortgage holders are reporting significant difficulties in meeting their financial commitments. Moreover, the percentage of homeowners with a mortgage

mortgages is increasing at a faster rate than that of other groups.

https://www.canada.ca/en/financial-consumer-agency/programs/research/financial-well-being-mortgages.html#toc0

Source: FCAC Report: The financial well-being of Canadian homeowners with mortgages.

OFigure 1.

A growing proportion of renters and homeowners with mortgages are stressed, and the stress level of homeowners with

resorting to borrowing to cover daily expenses surged from 27.3 per cent in August 2020 to a staggering 39.5 per cent by December 2022, highlighting the vulnerability of Canadian mortgage holders.

In addition, the report indicates that stress levels among mortgage holders are increasing at a faster rate in comparison to both renters and homeowners without a mortgage.

In response to findings of increased financial distress, the FCAC has released new guidelines to encourage federally regulated financial institutions (FRFIs) to work proactively with mortgage holders and provide personalized relief measures to those at risk of defaulting on their primary residences.

Recent mortgage delinquency rates compiled by Equifax Canada show that homeowners have been diligent in meeting their mortgage payments. However, experts are concerned about rising delinquency rates in other areas of household debt, such as auto loans, credit cards and lines of credit, and the rise in unsecured personal loans. These vulnerabilities raise concerns about potential risks for Canadians in general, including homeowners, in the coming months.

To mitigate the risk of mortgage delinquencies and foreclosures, some homeowners, who are at a higher risk of defaulting, may choose to sell their homes to alleviate the financial burden if conditions permit. While this may be a necessary step, it unfortunately exacerbates the housing crisis in Canada.

As interest rates continue to soar, mortgage brokers are also experiencing the impact of the Bank of Canada’s aggressive campaign to curb inflation. Reduced business activity has become the new norm for many in the industry, as potential homebuyers hesitate in the face of increasing mortgage rates.

Mortgage brokers, who are experiencing first-hand the challenges faced by mortgage holders, are playing a crucial role in helping clients weather the storm and navigate the complexities of the mortgage market. As mortgage holders brace for the possibility of

worsening conditions, brokers are empowering their clients to make in formed decisions that are aligned with their goals and risk tolerance.

In these trying times, being proactive and maintaining a positive mindset is critical to staying ahead. By embracing a growth mindset, brokers become better equipped to recognize and address challenges while focusing on the opportunities they bring. This enables them to adapt and adjust their strategies to align with the evolving landscape, ensuring that their clients receive optimal solutions despite chang ing circumstances.

Mortgage brokers are finding success by focusing on short- and medium-term goals, closely monitoring market developments and identifying potential challenges that may lie ahead. They are focusing on working with their client databases, identifying those who might need assistance (even if they have not sought it themselves) and reaching out to offer support.

Successful mortgage brokers are investing in continuous professional development, ensuring they are up to date with the latest market trends, mortgage products and changing regulations. Investing in sales and marketing strategies has also been instrumental for brokers to reach niche markets to showcase their market knowledge and expertise.

In these demanding times, the mortgage brokering community needs to stay connected, support one another and foster resilience.

Being part of your mortgage broker association strengthens the voice and role of mortgage brokers. By engaging with fellow members and leaders, associations can collaborate with industry stakeholders, learn from mortgage brokers in other regions, and advocate for balanced policies that preserve the financial well-being of Canadians while addressing the housing crisis. Ultimately, by elevating the role and voice of mortgage brokers and working together, the industry can effectively serve Canadians and their dreams of homeownership amidst an evolving economic landscape.

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AT YOUR VIRTUAL

Chris Kolinski likens social media to a billboard beside the highway. The key to success is sustained exposure.

BY LISA GORDON

While most older homebuyers still want to seal their mortgage transaction with a handshake, the younger generation likely doesn’t even want to meet their mortgage broker in person.

It’s a truth that is evident to some mortgage professionals, who are cultivating their image accordingly and using the power of social media to connect with young homebuyers looking for mortgage advice.

Ten years ago, Chris Kolinski jumped into the mortgage industry with both feet, giving up a physically gruelling welding career for a chance to do what he loves: talking with people.

“For me, if I do something, I jump head first and I go all in,” reflected Kolinski, 35, a mortgage broker with iSask Mortgage Brokers in Saskatoon. “That’s exactly what I did with this.”

That first year in the business was tough. Kolinski had some prior sales experience, but he simply relied on his people skills to drum up clientele.

“I made $16,000 from February to December that first year,” he said. “All of that went back into my business. I remember it was super hard.”

On top of that, Kolinski realized early on that he tended to be more introverted with new acquaintances.

“I had to get better at that, so I purposely put myself into situations where I would be uncomfortable. For example, I’d strike up a conversation with the grocery store clerk or with the server at a restaurant.”

In year two, he made a point to attend as many networking events as possible. That’s when he saw his career take off, and he began to focus on millennial and Gen Z homebuyers.

Over time, he noticed that his clients’ preferences had shifted.

“Originally, I tried to meet clients at the start and the end of their transaction, so I spent at least two hours with them,” he said. “But, especially since COVID, a lot of the young people don’t want to meet anymore. I’ve met only one client in person over the last three years. We do it all via phone, text, Zoom, email, Instagram or TikTok.”

From his perspective, that time savings allows Kolinski to build his business another way – through social media, “which is where the millennials are right now.”

Like many in business, he started out with a Facebook page – which actually generated the lead that resulted in his first deal. Over time, Kolinski has added

Young mortgage brokers find success through the power of online community, building their brand – and their business – one post at a time

Instagram, TikTok and LinkedIn, and dabbled in Twitter. He signed up for Meta’s new Threads platform, a direct competitor to Twitter, on day one. All told, he said social media has helped him close more than 80 per cent of his business over the last few years.

The key, said Kolinski, is to be your authentic self.

“Instead of just pumping out boring mortgage content, I post about what I’m doing in the community, whether volunteering with the Kinsmen Club, or posts about my family. People like that; they’re using me because I’m a real person.”

He likened social media to a billboard beside the highway. They key to success is sustained exposure.

“You have the billboard for a long period of time. People drive by every day and see your ad and it’s a constant reminder of what you do. Social media is the same. You constantly get your face and name in front of people. It’s just a matter of time before you get someone who needs a mortgage.”

While he has a presence on several platforms, Kolinski said there are subtle differences. Facebook is good for random posts about life and leisure as well as the odd instructional post relating to mortgages. Instagram is more visual, so he creates stories and reels with a lot of video content, aiming to post every day. His daily content has subtle variations across each platform to keep it fresh.

While LinkedIn is more serious, Kolinski stays true to a massive rebrand he initiated five years ago.

“I used to be a suit and tie broker, but it felt weird,” he explained. “I made the decision to be as authentic as possible online. Now, all of my branding is done while wearing a T-shirt, snapback cap and jeans – and that was one of the best decisions I ever made

for my business! I can be authentic and post in my own words, the way I talk to my friends.”

Now, people tell Kolinski that he seems approachable. He figures that while he may be losing some business with his casual attire, he’s also gaining the clients who want to work with a real person.

The other key to his social media success has been putting out good, consistent content that his followers want to consume – in other words, material that doesn’t feel like an ad. He’s also careful to send a personalized reply to anyone who interacts with him online.

“I’m very good at what I do and I can communicate really well,” said Kolinski. “I will talk about the minimum down payment for buying your first house in a 30-second video, for example. The more I’m posting videos and people are consuming them, the more they see I know what I’m talking about.”

it worked. When I entered the industry, I decided my goal was to educate clients, whether they are first-time buyers or already own property.”

Like Kolinski, Seroshtan hasn’t met any of his younger clients in person. Communication is usually digital or over the phone.

“There is a lot quicker response to a text message, especially if someone is at work,” he pointed out. “It can speed up the process. I don’t really have pre-COVID experience, so I started at a time when we couldn’t meet anyone. It was how I learned to do business and it seemed to be very efficient.”

When it comes to social media, Seroshtan has the best return from Instagram, where he directs useful content to his network of key contacts.

“My primary goal on social media is to connect with financial advisers and Realtors who will see my content and share it with their own clients, or refer them to me,” he said.

“It’s about brand recognition, name recognition, establishing credibility and familiarity … It’s very important to find a way to stand out and deliver value.”

He also builds credibility by offering his services to local news agencies, providing expert commentary on any mortgage-related developments.

“I knew that if I was going to do this and look casual like this, I had to double down on professionalism. Video has been a game changer.”

DELIVERING A DIGITAL EDUCATION

Konstantin Seroshtan, 32, made the jump into mortgages in 2020 after a career in automotive sales and finance. Today, he’s a mortgage broker with Mortgage Key (Tango Financial) in Kelowna, British Columbia.

He said young buyers are looking for guidance and education, and they are finding it online.

“I always refer back to my experience of buying my first home and I blindly followed the bank’s advice,” recalled Seroshtan. “At the end, I had no idea how

Ideally, posts must be short and provide knowledge, expertise and advice that people are seeking. Seroshtan works hard to put a humorous twist on his content so people will remember him.

While he said there is a time and place for raw data, most people tend to ignore it. He tries to make data easily digestible by educating his followers on what the numbers mean and how it affects them.

“It’s about brand recognition, name recognition, establishing credibility and familiarity,” said Seroshtan. “I think there are a lot of brokers who just post very dry stuff that people see everywhere. It’s very important to find a way to stand out and deliver value.”

When it comes to establishing himself as an authority, video is key.

“I like to provide education in small bits and pieces. I do 90-second Instagram reels where I share valuable industry tips or knowledge that is not so common – something that may be basic knowledge to us, but most people don’t know it.”

Konstantin Seroshtan

He also likes to provide a window into his daily life, whether it’s volunteering or playing sports or just normal activities. The key is to find things people relate to other than just business content.

With 80 per cent of his customers under age 35, Seroshtan spends multiple hours each day curating his own content and engaging with posts from Realtors and financial advisers.

“It can be time consuming, but there is a big aspect to social media outside of designing a post. It’s about building relationships.”

HARNESSING AI

Aside from social media, both Kolinski and Seroshtan are fans of artificial intelligence (AI) tools such as ChatGPT. (See P42: Navigating the maze of AI regulations)

“I love it,” said Seroshtan. “I’ve been trying to use it as much as possible, whether to come up with ideas or social content plans or even presentation structures. It’s very helpful. At the end of the day, you’re as good as your tools and knowledge.”

While he said anyone using AI is still responsible for checking the veracity of the content it generates, he thinks it will help brokers do better business.

“I don’t see it replacing brokers because humans want human contact, but it can optimize and streamline the processes.”

Kolinski agreed.

“I did an article where I said you won’t lose your job to technology. But you will lose your job to somebody using AI.”

He continued: “AI has already made my job much more efficient. I use ChatGPT for writing blog posts and helping with social media posts. It’s also helping me do my customer relationship management (CRM). It has been instrumental in improving my workflow, which gives me more time to engage people on social media.”

There’s no doubt technology is here and it is affecting nearly every industry. For mortgage brokers, social media offers powerful platforms to help build their brand while educating followers who will eventually bring business. With millennials and Gen Z making up the new wave of homebuyers, it makes sense to connect with them where they live a good part of their lives: online.

However, digital transactions do have an elevated risk of fraud, so both Kolinski and Seroshtan take care to thoroughly document their deals.

“I get everyone’s ID and comb through the documents more diligently,” said Kolinski. “I ask a lot of questions and if something is not making sense, red flags go up.”

Added Seroshtan: “Most of my clients come from vetted sources like real estate agents or financial advisers. But I also rely on the skills I developed during my automotive financing days. It’s easy for me to spot any gaps or inconsistencies.”

And, while AI tools like ChatGPT are still relatively new and sometimes inaccurate, they too offer opportunities to streamline workflow and improve efficiency. Brokers who put in the time to stay relevant and visible in today’s market will reap the rewards of a steady, loyal clientele.

Just don’t expect those clients to meet you in person.

AFRESH TAKE ON INDUSTRY EVOLUTION

Pineapple’s Shubha Dasgupta shares insight into his mortgage industry career and the values that drive his success

BY LISA GORDON

Shubha Dasgupta has never been one to avoid a challenge. In fact, he believes that on the other side of adversity lives greatness.

It’s a viewpoint that has served him well, from his childhood in Scarborough, Ont., to the present day as the CEO and co-founder of mortgage brokerage Pineapple.

“I’m famous for saying that when you ask people at age six or seven what their dream job is, no one says mortgage broker,” laughs Dasgupta. “What brought me here to this industry was entrepreneurship. I’ve been focused on that since the age of 20, when I launched my first business.”

After successfully exiting that business a few years later, Dasgupta was set to embark on another venture – but just as he was about to begin, his mother was involved in a life-threatening car accident. Instantly, his focus changed.

“I stayed with her for 45 days while she was on life support and then another 30 days while she was in ICU,” he recalled. “I didn’t leave her bedside. By the time she recovered, my head was no longer in that business opportunity. I went looking for something else. My cousin introduced me to the mortgage broker industry in 2007; I researched it and fell in love with it.”

Just like his native Scarborough, Dasgupta loves the fact that the mortgage industry is diverse.

“One of the beauties of this industry is the fact that we have people from all different walks of life,” he says. “Different experiences all converge here. We all do the same thing differently, with our own colour and our own flavour.”

Today, Dasgupta heads up six-year-old Pineapple, a coast-to-coast brokerage that includes 700 mortgage brokers and growing. But when he first joined the mortgage industry, he recalls learning a hard lesson.

“I thought I knew a lot about the industry but quickly realized I had no customers to share it with,” he recalled. “I had a conversation with one of the top brokers in Canada, who mentioned that he knew how to get customers in the door. It changed my perspective! Sales and lead generation is a big part of the mortgage business. A few years in, I was really focused on deepening customer relationships and embracing technology. I pieced together different tools to help my business run more effectively. Eventually, I was recognized as a member of the top one percent of brokers across the country.”

Hard lessons hold value, according to Dasgupta. He’s collected them along his career path, believing that handling adversity with poise is the secret sauce to career success.

After nine years as a broker with various organizations, Dasgupta partnered with other industry professionals to enhance the

Canadian mortgage landscape. They created a new brokerage option – one that was focused on adding value and offering fresh financing solutions to homebuyers.

“Pineapples are a symbol of warmth and hospitality and are often given as housewarming gifts,” he explained. “And, if you zoom in on our logo, you’ll see that the pineapple skin actually looks like a collection of rooftops.”

In an industry that has seen rapid, significant change in the last decade, Dasgupta is proud that Pineapple embraces innovation.

“We’ve built a culture of change, adaptation and evolution. I just love that. I love staying new and fresh and getting better.”

He said one of the stories that is never told is about the importance of real estate and how impactful it is in people’s lives. A home is a place where families grow – a place where people laugh, smile and cry.

“Some of the greatest moments in life happen within those four walls,” said Dasgupta. “That’s why today, I’m so proud to help Canadian mortgage brokers by sharing their successes and failures and empowering them to build their businesses. I’m also proud that as my role has evolved, I’m here to empower our staff. When I started understanding the impacts I was having on the lives of homebuyers, agents and our corporate team members, I began to really love my job. Once you engage like that, the magic happens.”

To Dasgupta, successful CEOs must be solutions-driven – a truth that’s become evident to him since Pineapple was founded. It’s also an opportunity to make a positive impact in other people’s lives.

“When I was a broker early in my career, I helped a woman who came here from a war-torn country with a dream of home ownership. She wanted to build a future for her family. I was able to help her arrange construction financing to turn a small bungalow into her dream home. That was almost 16 years ago and I’ve gone to her kids’ weddings and celebrated special milestones with her family. The trickle-down effect of what we do is so powerful.”

Likewise, Dasgupta speaks of the reward that comes from helping other mortgage agents and brokers to succeed. One person who’d been in the business for seven years

her kids’ weddings and celebrated special milestones with her family. The trickle-down effect of what we do is so powerful.”

with very limited success agreed to give it one more shot with Pineapple – and saw his income increase five-fold within 13 months. Looking ahead, Dasgupta sees tremendous opportunity for the Canadian mortgage industry.

“The future demographic of homebuyers really leans towards the personalized care, choice and attention that mortgage brokers deliver,” he said. “I think technology will enable and empower the mortgage industry to grow exponentially, and I think the demand and need for brokers will increase as financing decisions get more difficult.”

“When he’s not in Pineapple mode, Dasgupta is a proud family man who cherishes time with his wife and two children. He’s also an avid cyclist and philanthropist who is involved with several not-for-profit organizations.

He told Canadian Mortgage Broker that he’s known for two favourite sayings. The first opened this article, and the second is a fitting way to sum up Dasgupta’s own personal credo:

“We all have the opportunity to make a positive impact on the lives of others. All we have to do is try.”

When I was a broker early in my career, I helped a woman who came here from a war-torn country with a dream of home ownership. She wanted to build a future for her family. I was able to help her arrange construction financing to turn a small bungalow into her dream home. That was almost 16 years ago and I’ve gone to

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A B PROVINCE PROVINCE

INTERPROVINCIAL MORTGAGE BROKERING

BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC

Are provincial borders regulatory hard lines?

The term “mortgage broker” is not used consistently across the country. We are using it to refer to the individual or entity engaged in arranging mortgages.

BACKGROUND AND SCENARIOS

You are a mortgage broker licensed in Province A. Three potential borrower clients ask you to arrange mortgages for them. The first resides in Province B and owns real estate in Province A that would be offered as mortgage security. The second resides in Province A and owns real estate in Province B that would be offered as mortgage security. The third resides in Province B and owns real estate in Province B that would be offered as mortgage security. Given the would-be interprovincial nature of the transactions, are you able to act for any of these potential clients?

Granted, new technologies would make it reasonably straightforward for you to handle the mechanics of the mortgage arranging process across provincial borders. You could meet with clients via any of the numerous available video meeting and conferencing computer

programs; collect, share, and distribute written materials via email and various file sharing programs (including mortgage applications and supporting documentation such as employment verification documents, credit reports and property valuation documents); and obtain signatures on documents by using any of a variety of digital signature programs. However, just because you have the ability to arrange a mortgage interprovincially does not mean you are permitted to do so. Certainly, there is room for mortgage broker regulators to clarify the circumstances, if any, in which interprovincial mortgage brokering is permitted. Until such clarification is provided, mortgage brokers should exercise caution.

THE NEED FOR LICENSING

The provinces, albeit in language differing from one another, require a person engaged in arranging mortgages to first obtain licensing or registration. (We will refer to both licensing and registration as licensing.)

Our courts have interpreted the applicable sections of our Constitution as giving the exclusive right to regulate mortgage brokers to the provinces as opposed to the federal government.

Some of the provinces have entered into agreements [such as the Canadian Free Trade Agreement (CFTA)] that make it easier for a mortgage broker to be concurrently licensed in multiple provinces. For example, in determining whether a person qualifies for being licensed as a mortgage broker, the regulator may consider the person’s education and experience obtained outside of the province. However, such agreements do not remove the requirement for persons to comply with the legislation of each province concerning mortgage brokering, including obtaining licensing as required.

Canada’s mortgage broker regulators have voluntarily come together as the Mortgage Broker Regulators’ Council of Canada (MBRCC). The MBRCC is itself not a regulator. The council is a forum for the regulators to

work co-operatively, better share information, and co-ordinate engagement of stakeholders to identify trends and develop solutions to common regulatory issues. The MBRCC has provided the Licensing Information Tool at mbrcc.ca/LicensingInformationTool

By inputting the province of the broker, the province of the borrower and the province of the security property, the tool advises the mortgage broker as to the province(s) in which the broker needs to be registered to handle the subject transaction. The tool recommends the broker contact the province(s) indicated for further information. In providing this information the tool does not indicate that it removes the usual need for the broker to be licensed in the needed province(s) to do the transaction.

It seems that the requirements in the legislation for persons who engage in mortgage brokering activity to first obtain licensing remain intact. There is no indication that requirement is any less when interprovincial mortgage brokering is concerned.

OPTIONS

As unlicensed mortgage brokering is not permitted, the following six options appear to be available to a mortgage broker who has the opportunity to engage in interprovincial mortgage brokering:

n Decline to do the transaction

n Do the transaction without obtaining licensing

n Get licensed in the other jurisdiction as well

n Refer the matter to a broker licensed in the province needed

n Use a lending hub licensed in the other province

n Co-broker with a broker licensed in the other province

Each of these options comes with its own benefits, ease of completing the transaction and regulatory licensing requirements. We will look at some of these.

Decline to do the transaction

Exercising this option is straightforward. The mortgage broker simply declines to do the transaction. Accordingly, the issue of licensing requirements concerning interprovincial mortgage brokering does not arise. Of course, foregoing the transaction leads to the broker

foregoing any part of the related commission or referral fee.

Do the transaction without obtaining licensing

Exercising this option means the broker ignores any requirement to be licensed in the other province and does the transaction anyway. This option is listed here for completeness, but it is in no way encouraged. Depending on the lender, the transaction can be easy to complete. However, many lenders will simply refuse to do business with you as you are not licensed in the province. Being unlicensed, your entitlement to being paid a commission is at the very least doubtful. You may end up being no better off than having declined to do the transaction, even putting aside the regulatory consequences (including fines and suspension) being risked. By exercising this option, you would in effect be engaging in unlicensed mortgage brokering activity in a province that requires licensing. You may accordingly suffer regulatory consequences not only in your home province but in the other province as well.

Get licensed in the other jurisdiction as well

You may choose to become licensed in the other province as well. Obtaining initial licensing in that other province is made easier by the fact the provinces have agreements between them, as mentioned earlier in this article, to recognize education and experience obtained in other provinces. As obtaining licensing in any province takes time, this is not a suitable option except in relation to future possible deals, considerable advanced planning or a present transaction with a very distant completion date. By becoming licensed in that other province, you will be entitled to earn and keep your commissions without sharing them – at least for matters related to interprovincial brokering – with others. An additional advantage is that as a licensed broker, you will be entitled to attract more business by advertising in the other province.

However, you will need to pay the ongoing licensing fees in each of the provinces in which you are registered. To maintain that licensing, you will have to satisfy the continuing education requirements of those other provinces; this too can be expensive and time consuming. Even with the additional education, it can be

challenging for a broker to remain on top of the regulatory requirements of multiple provinces.

This can, depending on how many interprovincial transactions you complete, be relatively expensive and time-consuming. You will also have to consider the cost of any additional errors and omission insurance (E&O insurance) you may be required to carry.

It is worth mentioning that if the other province is Quebec, the laws, practices and regulatory practices are significantly different. Learning and staying on top of something so different can be challenging.

Refer the matter to a broker licensed in the province needed

Another easy option to accomplish is for you to refer the matter to a broker licensed in the other province. You will lose the opportunity to earn the commission and generally will have to instead settle for a far lower referral fee. While the referral fee might differ in amount in relation to how much work you did on the transaction, a concern would be that if you did substantial work, you engaged in unlicensed mortgage arranging. Provided you avoid doing that extra work and stick to making just the referral fee, you avoid triggering unlicensed mortgage broker activity issues.

Use a lending hub licensed in the other province

You may decide to co-broker the mortgage with a lending hub. Lending hubs vary as to the services they provide and the corresponding fees they charge. Some offer different plans from which you can choose. A common advantage is that you get to maintain the relationship with your client and the fee from the transaction.

A possible issue with exercising this option is that you are in fact remaining involved, sometimes very substantially involved, in arranging the mortgage. However, regardless of your status as being licensed in your own province, you are doing this as an unlicensed broker in the other province. An unlicensed broker involved in co-brokering a mortgage with a licensed broker may be seen as remaining engaged in prohibited unlicensed activity.

I temper the above comment by stating that this is a commonly used option. However, it is not certain whether the regulators are turning a blind eye to the activity, consider it acceptable, have other priorities or are knowingly exercis-

ing their discretion in allowing the activity.

It does provide the client with a lesser level of service in that the lending desk provides the mechanical steps of brokering and the client does not have the benefit of the broker qualified in the jurisdiction to provide the advice.

Some disadvantages of using a hub are that it can sometimes add delays to the mortgage application submission and approval process. The hub sometimes has processes and systems it goes through in getting paperwork upfront; this can be problematic where this causes delays and the possible transaction is time sensitive.

Co-broker with a broker licensed in the other province

You might decide to co-broker the transaction with a broker licensed in the other province. This option can have disadvantages similar to those in using a lending hub, in other respects it can overcome some of those disadvantages.

Co-brokering generally involves you giving up much more of your commission than the fee you would pay to a hub. However, the co-broker takes on the relationship with the client and does a larger portion of the work than does a hub. In some cases, co-brokering goes smoother with fewer delays because the co-brokering broker has certain relationships available to them with certain lenders in their province.

The possible issues described concerning a lending hub and a mortgage broker possibly engaging in unregistered activity apply here as well. If a person is unlicensed to arrange mortgages in another province, it seems illogical that their doing so with a licensed broker changes the fact that they themselves remain engaged in unlicensed activity. In one respect, the licensed broker could be seen as facilitating unlicensed mortgage brokering activity.

As with my comments concerning using a hub, I temper the above comment too by stating that this is a commonly used option. However, it is not certain whether the regulators are turning a blind eye to the activity, consider it acceptable, have other priorities or are knowingly exercising their discretion in allowing the activity.

RECENT DEVELOPMENTS

New Brunswick recently made clear its view regarding leads, referrals, and mortgage brokering engaged in by individuals and entities who are not licensed in the province. The Financial and Consumer Services Commission of New

Brunswick (FCNB) Consumer Affairs Bulletin 2023-002 states:

Any leads for a borrower in New Brunswick are to be pursued by a licence holder in the province. If an individual not licensed in New Brunswick receives a lead for a borrower in New Brunswick, they can refer to someone licensed under the Mortgage Brokers Act. Unlicensed individuals are not permitted to provide any services or advice other than to forward on contact information. Mortgage brokerages that have a lead process for out of province mortgage transactions, sometimes known as a “hub” or “access desk”, must ensure that all activities that constitute mortgage brokering are completed by a licensed individual.

Further, MBRCC’s 2023-2026 Strategic Plan includes the initiative to “Respond to Cross-jurisdictional Brokerage Operational Issues.” It states:

MBRCC will focus on the following key areas: A. E&O insurance coverage B. Licensing requirements when operating in multiple jurisdictions (e.g. co-brokering arrangements and trust account operations).

TAKEAWAYS

The need for interprovincial mortgage brokering is ever increasing and new technologies make the mechanical process easier. The present options available to mortgage brokers handling an interprovincial mortgage brokering transaction are too limited. Regulatory requirements have been outpaced by technological change. It does not serve the public to have mortgage brokers across the country be limited to referring the deal as being the only practical option free from regulatory risk, other than declining the transaction all together. The option of getting licensed in the other province would simply take too long to be available in most transactions.

Using lending hubs and co-brokering come with regulatory risks of their own. In fairness to mortgage brokers across Canada, regulators need to give reasonable notice to the industry on their view of interprovincial use of lending hubs and co-brokering. They need to assess the public interest and share with mortgage brokers the options that are acceptable concerning interprovincial mortgage brokering.

This article is not intended as legal advice. You are advised to obtain legal advice in specific instances.

Alberta curler Laura Walker finds success balancing family, sport and a successful mortgage industry career

BY LISA GORDON

Laura Walker thanks her love of curling for her home in Alberta, her family and her mortgage career.

Ten years ago, the devoted curler was living in Southern Ontario. Shortly after graduating from Wilfrid Laurier University in Waterloo, she was offered the chance to train with a new curling coach in Alberta. It seemed like an exciting opportunity to head west and play the sport she loved.

At the time, Walker had no idea her decision would lead to marriage, two kids and a career in the mortgage industry.

“The original plan was to stay for a year, but I never left,” she says.

According to Walker, the western provinces offer more opportunities for avid curlers, including more events, higher competition and closer proximity to Curling Canada coaches.

Alberta was a good fit. After about a year, she met fellow curler Geoff Walker at a bonspiel. They eventually married and started a family in the Edmonton area, and Walker now plans on being an Albertan forever.

While she loves Edmonton’s strong sense of community, Walker did find it challenging to manage a 9-to-5 desk job, curling and family life. She noticed that Karlen McDonald, mother of her teammate Taylor McDonald, attended many of their curling events.

ROCKS RATES

ROCKS TO RATES

brokers off-the-clock

“She was a big supporter of our team and she seemed to have flexible time, while at the same time earning a supportable income. That was really appealing to me.”

After learning that McDonald was co-owner of Mortgage Design Group Inc., a division of Axiom Mortgage Solutions, Walker was excited about the possibility of launching a new career that would fit with her competitive curling schedule and busy family life.

She earned her mortgage associate licence and began working for McDonald in September 2016 at the Mortgage Design Group.

When I step out onto the ice, I can win or I can lose. I think that helped me when I started in the mortgage industry, because it takes some time to build your referrals, as well as your client base, and it takes time to start to make a good income.

“The brokerage was amazing to help me get started and they supported me right from the beginning,” recalled Walker. She deals mostly with residential mortgages and particularly enjoys working with first-time buyers.

“I love working with first-time buyers; I love being able to educate and give them information,” she said. “Communication is so important.”

She finds it very gratifying when “they are so excited when everything goes through and they get their keys to their new home. It’s an experience that I really enjoy in my job.”

As a mortgage broker, professional curler and mother of two young children, free time is a precious commodity for Walker. When she does carve out some time to herself, she enjoys the odd game of golf. Beyond that, Walker helps to grow her sport by volunteering with youth curling programs.

“That’s how I got started and having a good experience when you are young, enjoying your time and making new friends, is what helps keep youths in sport. I think that is really important,” she said.

Walker and a teammate also run curling camps once a year in three rural communities in Saskatchewan and Alberta – both feel strongly that it is important to give back to the community.

A lifetime spent on the curling sheet proved valuable to Walker when she made the transition to the mortgage industry. She understood from the beginning that it would take patience and hard work to reach her new career goals.

“Curling, or any sport in general where you are working at a high level, teaches you that there is a lot of hard work involved,” she commented. “There is nothing guaranteed. When I step out onto the ice, I can win or I can lose. I think that helped me when I started in the mortgage industry, because it takes some time to build your referrals, as well as your client

base, and it takes time to start to make a good income.”

Her curling industry connections did help to kick off her client base, although Walker doesn’t feel her success in the sport garners her much recognition in the mortgage world.

“Those who recognize me are either little girls or ladies over 65,” she joked. “I do ask new clients how they heard about me, and it is nice when they say they have seen me play, either live or on TV.”

Those who have seen her curl, especially the children, seem to feel like they know her.

“Curling is a unique sport in the sense that it isn’t loud, we are not wearing helmets, and they can pretty much hear everything that we are saying,” said Walker. “So, when a kid comes to meet you and they have seen you on TV, they feel like they are meeting a friend. I really enjoy that aspect of it; it’s a really cool feeling and it makes us want to keep doing it as long as we can.”

What’s next for Walker? Her future goals include making the 2026 Olympic curling team for mixed doubles with partner Kirk Muyres. After that, she is not sure what curling holds for her, but she does have her mortgage career mapped out. When both of her children are in school, which is about four to five years from now, Walker plans to devote more time to building her mortgage broker business.

Even if she isn’t throwing rocks to the house anymore, it seems she will still be helping people find a home.

This interview with Laura Walker 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 creating an award-worthy garden, 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

INNOCENT SHELTERING OF ASSETS CAN AMOUNT TO FRAUD

Another exit strategy for lenders

BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC INTRODUCTION

Mortgage brokers working for lenders are often asked about the exit strategy available if the borrower defaults on the mortgage. They, and lender-brokers, should be pleased that the Ontario Court of Appeal (Court) in Ontario Securities Commission v. Camerlengo Holdings Inc., 2023 ONCA 93 (CanLII) (Camerlengo) has confirmed the availability of a very wide exit gate. On the other hand, borrowers will be surprised, perhaps even shocked, to learn courts are open to finding that their seemingly prudent, strategic structuring of personal affairs can amount to fraud.

The circumstances of the case are nothing particularly novel. A spouse opens a business and transfers the family home into the name of the other spouse. The motivation for the spouse may be to protect the family home from the business’s creditors if the business fails. Unfortunately for borrowers, that strategy likely amounts to a fraudulent conveyance that will be void relative to their creditors.

FACTS

In Camerlengo, the husband and wife had together purchased a home in 1988. In 1996, the husband and a business partner opened an electrical contracting business. Four months later, each transferred to his wife the ownership of his family home, free of charge and using the same lawyer. The husband continued to live in the family home, and his wife intermittently mortgaged it to fund his business activities.

Fifteen years later (in 2011), the business failed when a customer failed to pay a $1.3 million invoice. To help pay its debts, the business arranged a loan from a business associate who was later found by the Ontario Securities Commission (OSC) to have defrauded investors, including the husband and wife. In 2018, the OSC issued a disgorgement order against the business associate, that is an order to give up any profits the business associate made as a result of the fraud. The OSC also obtained an order to garnish and recover the money the husband had borrowed from the business associate.

The OSC sued the husband, wife and business claiming that the transfer of the house all those years ago was a fraudulent conveyance intended to defeat creditors’ claims. The OSC claimed that at the time of the transfer the husband and wife were concerned about the husband’s potential exposure to personal liability resulting from his rapidly expanding electrical contracting business that started bidding on, and working on, million-dollar high-risk projects. The OSC claimed the transfer was made with the intent and purpose of defeating the husband’s existing and future creditors of their just and lawful actions, suits, debts, accounts and damages. The OSC claimed that because the conveyance was fraudulent, it is void and should be ordered set aside, thus making the family home available to OSC toward satisfying their claim.

The husband claimed that the transfer was done when he had no business debts and so was not intended to defeat creditors.

The issue for the Court was whether a transfer intended to avoid debts that might exist in the far-off future could amount to being a fraudulent conveyance.

THE LAW

Section 2 of the Ontario Fraudulent Conveyances Act (FCA) states:

Every conveyance of real property … made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful

actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns. (emphasis is mine)

While Camerlengo is an Ontario case, it is influential in other provinces with similar legislation. For example, British Columbia’s Fraudulent Conveyance Act similarly states, in part:

If made to delay, hinder or defraud creditors and others of their just and lawful remedies … a disposition of property … is void and of no effect against a person or the person's assignee or personal representative whose rights and obligations are or might be disturbed, hindered, delayed or defrauded, despite a pretence or other matter to the contrary. (emphasis is mine)

The Court, applying precedents, said that “intent to defeat” applies not only to current creditors at the time of the transfer but to future creditors as well. Specifically, it said: The case law interpreting s. 2 of the FCA is clear that a subsequent creditor – that is, a claimant who was not a creditor at the time of the transfer – can attack a transfer if the transfer was made with the intention to “defraud creditors generally, whether present or future.”

THE DECISION

The conveyance is therefore fraudulent if the motivation for the transfer was to defeat business creditors of the husband who might arise in the future – in Camerlengo, 15 years into the future. The creditors did not need to exist or even be contemplated at the time of the transfer.

Some indicators from past cases indicating a fraudulent intent include:

n The debtor’s financial state at the time of the transaction was precarious, including deficiencies in income, assets, solvency and an inability to pay debts.

n The existence of a family or close relationship between the parties to the transaction.

n The transfer effectively divested the debtor of a substantial portion or all of his or her assets.

n The transfer had the effect of defeating, hindering, delaying or defrauding creditors.

n There was evidence of haste in making the transaction.

n There was evidence of secrecy, fabrication, falsehood, destruction or loss of documents, or suspicious circumstances in the making of the transaction.

n The transaction occurred near in time to notice of debts or claims against the debtor.

n The consideration for the transfer did not correspond to the value of the property.

n The absence of a business purpose or other justification for the transaction.

n The transferor retained possession or use of the property.

n The transferor retained a benefit or an ownership interest in the property.

The Court found enough of these factors to be claimed that, if proved, would lead to the conveyance being fraudulent. It accordingly refused to dismiss the case and sent it for trial.

CONCLUSION

It is easy to understand that the outcome may seem unfair, surprising and shocking for borrowers. However, lenders and those who advise them can take some comfort in knowing they have one more exit strategy, or at least one of their exit strategies can be held open wider and for longer than many would think right. Mortgage brokers who advise lenders and those who are themselves lenderbrokers should be aware of that additional arrow in their quiver.

This article is not intended as legal advice. You are advised to obtain legal advice in specific instances.

... a subsequent creditor – that is, a claimant who was not a creditor at the time of the transfer – can attack a transfer if the transfer was made with the intention to “defraud creditors generally, whether present or future.”

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SUPPORTED BY

ORIGINAL VS. ELECTRONIC SIGNATURES:

ARE ELECTRONIC SIGNATURES AS LEGALLY ENFORCEABLE AS HANDWRITTEN ONES?

BY JORDAN MARIO JUTRAS

As Michael Scott once professed in the hit TV series The Office, “real business is done on paper – write that down,” which a classroom full of MBA students promptly types on their laptops.

As (un)insightful as Michael’s comment may be, in reality, today’s “real business” is generally done via email or other electronic means. Everyday, countless agreements are executed through typed signatures, encrypted digital signatures, or electronically “handwritten” signatures (e.g., using a tablet and stylus).

How does the law treat all these different types of signatures?

Are they as valid and legally-binding as original, handwritten, wet-ink signatures on paper?

Long before electronic signatures became commonplace, our legal system has taken a flexible approach to signature requirements on documents by accepting marks, symbols, or stamps in place of handwritten signatures. Legislation across Canada today continues that trend by recognizing that documents and signatures in electronic format generally satisfy any legal requirement for a record to be “in writing” and “signed.” Except for some special circumstances where a handwritten signature is strictly required (e.g., for affidavits), there does not appear to be a meaningful distinction between handwritten or electronic signatures.

LEGISLATION AND CASE COMMENTARY

Around the turn of the millennium, British Columbia, like several other provinces, enacted the Electronic Transactions Act to govern the use of electronic signatures, among other things. The Act defines an “electronic signature” broadly as any “information in electronic form that a person has created or adopted in order to sign a record and that is in, attached to or associated with the record”. This expansive definition opens the door for flexible interpretations. What may not have commonly been regarded as a formal “signature” may now to be recognized as such.

The Act makes it clear that, subject to certain prescribed exceptions, “if there is a requirement under law for the signature of a person, that requirement is satisfied by an electronic signature”. The Act also clarifies that certain requirements – such as that a document must be “in writing” or the use of other similar words and expressions – do not by themselves necessarily prohibit the use of information or records in electronic form. Legislation in other provinces contains similarly worded provisions.

The introduction of these statutes did not necessarily revolutionize the law concerning what was considered to be an acceptable signature. Rather, they confirmed and reinforced longstanding legal principles and the flexibility with which courts have approached this issue.

For example, in IDH Diamonds NV v. Embee Diamond Technologies Inc., Justice Layh of the Court of Queen’s Bench (now King’s Bench) for Saskatchewan reviewed earlier cases commenting on the acceptability of different forms of signatures and offered the following conclusion:

[C]ourts have considered an electronic signature as a valid signature simply under longstanding principles of common law. […] The common law has always applied a wide range of analysis to determine the sufficiency of a signature. For example, an ordinary signature at the foot of a document probably provides more comfort as to the authenticity of its contents than a signature at the head of a document even though both are “signed.” Common law courts have considered several deviations

from “wet ink” signatures, including simple modifications such as crosses, initials, pseudonyms, printed names and rubber stamps.

I find, therefore, that the provisions of the EIDA [Saskatchewan’s equivalent to BC’s Electronic Transactions Act] are helpful in this application, but they do not replace a broader analysis that has always been part of the common law. In my view, the real intent of the EIDA is to ensure that electronic forms of signatures may be sufficient to meet the measure of what might be a written and signed document.

Justice Layh also noted that nothing in particular turns on what format a signature takes. Fundamentally, a signature serves two primary purposes: “[o]ne is to identify the person who is signing; that is to say, to identify the source and authenticity of the document. The other purpose is to establish the signatory’s approval of the document’s contents.”

This discussion and analysis of the law was adopted in British Columbia in the case of Johal v. Nordio, which held that a signature block in an email was

sufficient to constitute an “electronic signature” within the meaning of the Act, ultimately representing acknowledgement of a debt owing in that case.

In the recent decision of South West Terminal Ltd. v. Achter Land, the court of King’s Bench for Saskatchewan held that a text containing a thumbs up emoji “ ” was sufficient to meet the signature requirement of a contract and to convey that party’s acceptance of the contract.

Even in situations where a handwritten signature might typically be thought to be required – such as on official court orders, often leading lawyers to include terms in the order allowing for them to be signed electronically instead – at least one jurisdiction has observed that such a practice is not necessary. In Thompson Brothers (Construction) Ltd. v. Alberta (Workers’ Compensation Board Appeals Commission), the Court of Appeal of Alberta commented that terms permitting electronic signatures are “not necessary, as civil practice must keep up with technological advances, and the Court accepts electronic signatures of counsel. […] [T]he rules generally do not contemplate original signatures”

FORGERY

Concerns related to forgery or proper attribution are, according to some, no more prevalent with electronic signatures than they are with original, handwritten ones. As the Uniform Law Conference of Canada observed:

“The Uniform Act does not say how to show who signed an electronic document. Attribution is left to ordinary methods of proof, just as it is for documents on paper. The person who wishes to rely on any signature takes the risk that the signature is invalid, and this rule does not change for an electronic signature.”

That being said, it should be borne in mind that forging an “authentic copy” of someone’s signature is markedly easier when electronic records of that signature exist. If a file containing an authentic, electronic signature makes its way into unscrupulous hands, it becomes much more difficult to prove

that any unintended application of that signature was fraudulent. Consider the challenges of proving that as compared with forged handwritten signatures, where handwriting experts can opine on the authenticity of a given signature. Fortunately, some specialized electronic signatures offer enhanced security features and can combat against forgery and misuse through encrypted digital certificates. These digital certificates are maintained by a registration system and are assigned to a subscriber who retains sole control of the certificate. Application of a subscriber’s signature in any electronic context typically requires a password. Use of these specialized services is tightly regulated, and any misuse can result in serious consequences for the subscriber.

CONCLUSION

Generally speaking, the law does not treat electronic signatures any differently than original ones made by pen and paper. Certainly, there is no presumption that an electronic signature is any less formal or valid than a handwritten one. In fact, the law has explicitly recognized that signatures can come in many different forms, including emojis. Even in the absence of anything resembling a standard signature, there may be enough surrounding evidence in a given document to identify the “signatory” and to prove their intention to be bound by the contents of the document. Each circumstance is unique and requires careful legal analysis.

All of this is not to say that handwritten signatures no longer serve any purpose, however. Indeed, an original handwritten signature may be required in certain contexts where any type of electronic signature is strictly prohibited by law.

Jordan Mario Jutras is an associate at McQuarrie Hunter LLP in Surrey, British Columbia. As an associate in McQuarrie’s Dispute Resolution and Litigation practice group, he assists clients with a variety of civil disputes.

Information: mcquarrie.com

If a file containing an authentic, electronic signature makes its way into unscrupulous hands, it becomes much more difficult to prove that any unintended application of that signature was fraudulent. Consider the challenges of proving that as compared with forged handwritten signatures, where handwriting experts can opine on the authenticity of a given signature.

BALANCING THE BUSINESS

Managing pressure and personal well-being

BY SHERILEE BAKER

ith their stress levels rising almost as rapidly as interest rates, many mortgage brokers are finding it more and more difficult to balance the demands of their business and personal well-being. Concerned clients are increasingly dependent on them for support and reassurance, which is sometimes challenging to provide. Nevertheless, many brokers are working long hours to do all they can to keep clients informed and allay their fears, but it’s taking a toll. As the pressure mounts, burnout has become a serious threat.

We spoke to a range of brokers – experienced and newly qualified – for their advice on how to cope with these pressures and to share their strategies for effectively managing in difficult times.

WCREATING OPPORTUNITIES OUT OF CHALLENGES

“Where there’s more challenge, there’s more opportunity. Be all over that,” says Kimberlee Freeman, founder of St. Catharines, Ontario-based KMF Enterprises and a veteran in the mortgage industry. She sees every challenge as an opportunity. To bolster client relationships and avoid waiting for clients to reach out with concerns, Freeman advises mortgage brokers to be proactive in their approach and communicate early and often to help calm their clients’ fears.

“Call every single client,” she suggests. “Let’s jump ahead of that panic mode because they’re all panicking silently in their own houses.”

Freeman also underscores the importance of being up to date and knowledgeable about alternative and private lending options.

“Knowing your lenders is always important, but it’s even more crucial in today’s environment,” she says. “Stay

knowledgeable and educated about all your potential solutions for any client situation or request.” According to Freeman, not having the right training to enable you to provide solutions

recognizing there are human elements to a mortgage broking career. “Mistakes are a fantastic learning opportunity, but as a mortgage professional, you have a very small margin for error,” notes Jackson.

“I think tending to yourself – and making sure your self-care cup is full – is really essential to be able to deal with that level of stress,” advises Jackson

Echoing Jackson’s sentiments, Bokser advocates for self-care and work-life balance. Her love for outdoor activities like boating, camping and paddleboarding help her unwind and maintain perspective. “It’s just so important to take time, practise self-care and enjoy life. It really is too short.”

to your clients may be a contributing factor to the slowdown in business some mortgage brokers are experiencing.

To help alleviate some of the stress, especially for new brokers, she suggests that they work with another agent (new or veteran) who can help them navigate their career and feel more confident overall.

“Buddy up with someone so you’re not alone – it gives you a little more confidence to get through a difficult time as you’re learning,” she advises, and notes that taking the opportunity to lean on each other as a team, and share knowledge, can benefit everyone.

EMBRACING SELF-CARE AND COMPASSION

Natalia Jackson, an Ontario-based mortgage broker with Oriana Financial Group of Canada Ltd., has faced her share of stress in her career and places a high priority on self-care.

“If you don’t take care of yourself, you can’t take care of your business,” she says. This revelation helped her rediscover her love for her job during a particularly stressful period in her career. “Learning to approach myself with grace and compassion and making sure I have enough time for the things that fill my cup has been completely transformational for my business.”

Another game-changer in her business was investing in technology and finding systems and solutions that worked for her. “An organized desk is an organized mind,” she says, encouraging mortgage brokers to leverage technology to save time and increase efficiency. “Consider upgrading your equipment; the long-term benefits will outweigh the initial price,” she adds.

“We’re human, and human beings are allowed to make mistakes,” says Jackson,

She recommends filling your cup with activities that bring joy and peace, whether that’s meditation, talking to a friend or going for a walk. “When you’re operating from a place of peace instead of a place of fear, you’re more capable to do your job, ” she says. “Once you start showing up more authentically for yourself, you show up more authentically for the people in your life, including your clients.”

In addition to compassion and grace for yourself, Jackson recommends extending this approach to lenders and clients as well. “We’re all in this together trying to help,” she says, emphasizing the current financial landscape has made it challenging for everyone.

Jackson also recommends coming together as a team with others in the brokerage. She suggests a weekly meeting to create a closer, family-like relationship within the brokerage and being able to actively share information, benefit from insights and even focus on simple well-being initiatives like meditation or breathing exercises together.

“Having that time to have a conversation with fellow colleagues and brainstorm things makes people feel more connected and like they’re not going through it alone,” she adds.

FINDING BALANCE AND THE RIGHT SUPPORT

Carrie Bokser, a mortgage broker with Bokser Mortgage in North Vancouver, B.C., is viewing the current slowdown in business as an opportunity, and she is maximizing the time to strengthen relationships by reaching out to clients and checking in with them. It’s also a great time to revamp systems, workflows and tidy her workspace. She understands the mortgage business is cyclical and quiet periods are only temporary.

Bokser believes that it is crucial for mortgage brokers, especially those who are new to the industry, to find a supportive brokerage and mentor. Like Freeman’s buddy system, Bokser suggests working with a mentor and having a support system can make all the difference. “I think [it’s important] for new brokers to have a good brokerage, have a very good support system at home and really know what you’re getting into,” she says.

Above all, Bokser emphasizes the importance of understanding the complete context of her clients’ situation. This requires reviewing not only their personal financial situation and future goals, but the state of the market and economic conditions. “It’s not just about the mortgage, it’s about the person, the family, their goals, everything,” she adds.

Kimberlee Freeman

Natalia Jackson

Carrie Bokser

transparent and proactive, he is better able to manage clients’ expectations and reduce stress in the current economic environment.

Discussing the ways that he handles the challenges that he faces in the industry, Sharma says: “It’s important to just remove yourself and remind yourself that it’s not you and this is the industry that we chose to be in. It’s going to

Devin Sharma

WHAT YOU SEE

MAY NOT BE WHAT YOU GET WHEN LENDING ON A STRATA PROPERTY

Strata Depreciation Reports help determine value

BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC

One of the primary considerations for a mortgage broker preparing – or a lenderbroker reviewing – the loan application is the value of the security property. When the property is a strata lot, this value can be difficult to determine without a depreciation report. An appraisal may advise as to the value of the strata lot alone, without detailed consideration as to the common property; however, a depreciation report, among other things, sets out the condition of the common property and estimates costs of needed repairs and/or replacements.

This additional information can be critical in a lending decision. For example, the value of a strata lot may be sufficient to support a particular loan application but for the fact the low-quality concrete used in the building supports has

resulted in major repairs being needed to the exterior of the building, the parking lot and other common property. Each owner may be required to pay additional strata fees to cover the cost of these repairs. The depreciation report sets out the estimated costs of these repairs as well as options for collecting the associated fees from the strata lot owners. The deficient state of the common property and the costs each strata lot owner will have to pay to repair the deficiencies results in the strata lot having a lower value than might otherwise appear. The information in the deficiency report allows the lender to make a more informed lending decision.

The following comments concerning depreciation reports should be of interest to mortgage brokers and lender-brokers across Canada; however, the availability of and specifics contained in such reports vary across provinces. The following comments focus on the circumstances in British Columbia.

WHAT IS A DEPRECIATION REPORT?

A depreciation report provides a 30-year projection concerning maintenance, repair and replacement costs of a strata corporation’s common property and assets (such as common areas of the building, roads, parking lots, grounds and recreation amenities).

The report includes comments noting what is owned by the strata corporation, how much money is in the contingency reserve fund (a fund to which owners are required to periodically contribute and which is used to maintain the common property), when each building system will likely need to be repaired/replaced, estimates of the future cost for repairs/replacement, and possible financial arrangements addressing the future.

WHO MUST PROVIDE THE REPORT?

British Columbia’s Strata Property Act requires strata corporations with five or more strata lots to, unless waived, obtain depreciation reports.

WHEN MUST THE REPORT BE OBTAINED?

A strata corporation is required to obtain its first strata report within six months of its second annual general meeting. Following that, the report must be renewed every three years. It is open for a strata corporation, with a 75 per cent vote, to waive obtaining or defer updating a report. In the absence of a 75 per cent vote, the strata corporation must obtain the report within the following six months.

WHAT MUST THE REPORT CONTAIN?

The Strata Property Act regulations require that a depreciation report must include a physical component inventory and evaluation, and a financial forecasting section.

The physical component inventory and evaluation is to be based on an on-site visual inspection by the author of the report. Each item is to be described and the service life over the next 30 years is to be estimated. This includes, but is not limited to: the building; the exterior of the building (such as roofs, roof decks, doors, windows and skylights); building systems (such as the electrical, heating, plumbing, fire protection and security systems); common amenities and facilities (such as the pool, exercise room and guest house); parking facilities and roadways; utilities (such as water and sewage), landscaping (such as paths, sidewalks, fencing and irrigation); interior finishes (such as floor coverings and furnishings); green building components; and balconies and patios.

The report needs to identify the parts of the common property and limited common property for which individual strata lot owners are responsible to repair and maintain (such as patios and balconies designated as limited common property in a highrise building).

The financial forecasting section of the report is intended to help the strata corporation and owners plan for the repair and maintenance of common property and assets. It must include the anticipated maintenance, repairs and replacement cost for expenses that usually occur less often than once a year or do not usually occur.

These are to be projected over the next 30 years, and the factors and assumptions (such as interest rates and inflation rates) are to be stated. The author is to provide at least three cash-flow funding models covering the next 30 years. The strata corporation need not adopt any of the models. The current balance of the contingency reserve fund is to be stated, less any expenditures already approved but not yet deducted. How the fund is currently funded is to be stated, such as by the amount contributed to it by the owners of strata lots.

The report is also required to indicate any other appropriate information or analysis that the strata corporation or the person providing the depreciation report considers appropriate.

WHO CAN PROVIDE THE REPORT?

The individual or company preparing the report must have the knowledge and expertise to:

n Understand the scope and complexity of the strata corporation’s common property and common assets;

n Understand the individual components;

n Understand the strata corporation’s bylaws and any agreements entered

The financial forecasting section of the report is intended to help the strata corporation and owners plan for the repair and maintenance of common property and assets. It must include the anticipated maintenance, repairs and replacement cost for expenses that usually occur less often than once a year or do not usually occur.

into with owners regarding common property and strata lots; and

n Prepare a depreciation report that complies with the regulations including a physical component inventory and evaluation and financial forecasting.

The report must include a description of the author’s qualifications, the errors and omissions insurance carried by the author (if any), and any relationship between that person and the strata corporation.

WHO HAS ACCESS TO THE REPORT?

The most recent depreciation report, if any, must be attached to the “Form B: Information Certificate” provided to buyers.

The strata corporation must retain:

n Any depreciation reports obtained by the strata corporation;

n Any reports obtained by the strata corporation respecting repair or maintenance of major items in the strata corporation; and

n Records and documents obtained by the strata corporation from the owner developer.

CHANGES NEEDED

While the requirement for a periodic depreciation report containing the state of the strata property together with anticipated repair/replacement costs is sound, much of the anticipated value is not available in the market because many strata corporations exercise their ability to waive the requirement. British Columbia Financial Services Authority has recommended strengthening depreciation reporting requirements, after it has completed consulting with stakeholders. Certainly such a change should be welcomed by mortgage brokers, particularly lender-brokers.

This article is not intended as legal advice. You are advised to obtain legal advice in specific instances.

NAVIGATING

AI REGULATIONS

NAVIGATING THE MAZE OF

Tips for preparing your business compliance programs

BY GEORGE R. WRAY, STELA HIMA BAILEY and ELIOT ESCALONA

The conversation surrounding Artificial Intelligence (AI) has moved at breakneck speed since the end of 2022 with the release of ChatGPT and other generative AI application. In a very short time, even for the fast-paced world of technology, the change from accepting the inevitable AI to adopting it, has been pronounced. The benefits of AI have become clear. So too have the concerns, worries and risks.

Companies that have, or are looking to deploy, AI technologies are quickly discovering that regulatory approaches to AI vary significantly across jurisdictions, and across industries and sectors, particularly within financial services, insurance, health care, retail and e-commerce. According to the Organisation for Economic Co-operation and Development (OECD) there are currently over 800 AI policy initiatives from 69 countries, including the European Union. Canada itself is inching towards its own regulation of AI, with the Artificial Intelligence Data Act (AIDA) being introduced by the Canadian government as part of Bill C-27, the Digital Charter Implementation Act, 2022

The main purposes of the AIDA are to:

1. regulate international and interprovincial trade and commerce in AI systems by establishing common requirements, applicable across Canada, for the design, development and use of AI systems; and

2. prohibit conduct that may result in serious harm to individuals or their interests.

The pacing problem that always accompanies government attempts to regulate new technologies has become especially pronounced with worries about the “existential risk” posed by AI. With this wide swath of regulatory focus, a degree of harmonization is beginning to develop, having regard of some core principles of AI, such as: (i) transparency and explainability; (ii) reliability; (iii) robustness, security and safety; (iv) fairness and avoidance of unfair bias; and (v) ethics and accountability.

Given the interconnected nature of modern information technology systems, there will be a strong motivation towards global harmonization, as is reflected in the AIDA. What this means for your business in Canada is that close attention must be paid to global legislative and regulatory developments, as the impact of these developments will be onerous for your compliance

teams, which will in turn require your compliance teams to also keep pace.

THE EMERGING CORE PRINCIPLES OF AI REGULATION

Consensus is emerging around the core principle that AI products and services must be trustworthy, and this must be the focus of any compliance program. The Organization for Economic Cooperation and Development (OECD), which has been working to harmonize global AI regulatory approaches, has identified transparency and explainability as key components of effective AI regulation. Internationally, regulation is pushing AI creators to commit to transparency when it comes to the inputs and outputs of AI, and the training methods used to build the AI systems.

Explainability refers to providing individuals who are receiving AI’s outputs the information required to understand how the AI system arrived at or created a given output. This requires a business to provide clear and understandable explanations about the factors and logic behind the outcome from a specific AI system. Businesses making transparency and explainability a priority in the development of their AI will make compliance a much easier task.

It is inevitable that AI systems will experience errors. Reliability and robustness concerns about the operation of the AI system pose many questions: is it achieving its intended goal? Are there verification and validation methods incorporated into the system? If the AI systems are not working as intended, how will the errors be addressed?

The life source of AI is data, and privacy is central to the development of AI systems. Businesses whose AI systems use consumer data or even more sensitive personal information to produce outputs need to conduct data privacy assessments before using AI to understand its impact. Data anonymization, data aggregation and other forms of data privacy protection need to be carefully considered and applied to instill trust in users and regulators alike. Canada, amongst other jurisdictions, has identified privacy and data protection as a critical aspect of AI regulation, making it a priority for any business looking to enter these markets.

Building out and monitoring AI systems to ensure that they are not unfairly biased or adversely impact human rights will be a prime focus of regulatory schemes.

Ethical and accountable AI is another tenet common amongst most regulatory approaches. Accountability flows from the need to develop ethical AI systems. The OECD’s definition of accountability in AI development is that of an ethical and moral expectation on businesses to ensure the proper functioning of the AI systems they design, develop, operate, or deploy, in accordance with their roles and applicable regulatory frameworks.

Even while awaiting passage of the AIDA, any Canadian organization designing, developing, deploying, or using AI systems should be developing its risk management framework and compliance programs to mitigate the various categories of risks (e.g., legal, ethical, business, reputational, etc.) that may arise from these activities.

Building out and monitoring AI systems to ensure that they are not unfairly biased or adversely impact human rights will be a prime focus of regulatory schemes.

BUILDING YOUR COMPLIANCE PROGRAM

To incorporate the key governing principles of AI, you must first identify and list the automated decision-making tools used by your business. A comprehensive AI risk-management program that includes a risk-classification system, risk-mitigation measures, independent and ongoing audits, data-risk-management processes and an AI governance structure cannot be built without such an inventory.

Some steps businesses can take to operationalize these key principles and to build out compliance programs include the following:

1 Develop a clear and concise understanding of your business' use of AI. Achieving transparency and explainability requires the business to have a thorough understanding of how AI is deployed, its operational mechanisms and its impact on customers, suppliers, employees and the broader community associated with the business. Compliance officers must be able to explain how the AI systems work and how decisions are made.

2 Understand the use of AI by your suppliers and third-party vendors and its impact on your customers. It is crucial to have a comprehensive understanding of how AI is utilized by your suppliers and third-party vendors, as well as its implications for your customers. This entails being well-informed about the software employed by these entities, including the underlying models and datasets used for third-party AI development and training.

3 Establish a robust compliance program and team dedicated to AI. Assigning the responsibility of AI regulation to a specific individual or team is essential for ensuring compliance with AI initiatives within your organization. This designation not only demonstrates a proactive approach but also showcases a commitment to collaboration and responsiveness towards regulatory bodies. It facilitates the development and adherence to a cohesive strategy, promoting effective governance and regulatory compliance in AI-related endeavors.

4 Create risk frameworks and impact assessments. Determine the risk (and level of risk) associated with each AI system and process, and document how each risk should be addressed, mitigated or resolved. The consequences of such misuse of AI by businesses can be significant. To address such risks, the National Institute of Standards and Technology (NIST) released the initial version of its AI Risk Management Framework in January 2023. It is crucial for companies to prioritize the safety and security of their AI systems and tools by following the guidelines provided by NIST or similar organizations.

5Formulate AI policies and governance structures that embed the principles of transparency and explainability, data privacy protection, and the ethical and accountable handling of datasets within your organization. The basic advice is this: being proactive and prepared for AI regulations in Canada and around the world in which your business operates and building out your compliance teams should be done now, because the future is already here.

The basic advice is this: being proactive and prepared for AI regulations in Canada and around the world in which your business operates and building out your compliance teams should be done now, because the future is already here.

Borden Ladner Gervais LLP (BLG) is the largest truly full-service Canadian law firm. George W. Wray (Partner) is an experienced litigator in all aspects of products law across various industry sectors; Stela Hima Bailey (Associate) specializes in the resolution of complex construction disputes; Eliot Escalona (Associate) focuses on transactional work for private companies, infrastructure projects and project finance. More information: blg.com