The Canadian Mortgage Broker Magazine - Winter 2022 by CMBA (National)

WINTER 2022 $6.95

THE MAGAZINE FOR PROFESSIONAL MORTGAGE BROKERS

Open banking will change mortgage brokering p.12 Meet the mortgage broker the mayor p.38 Lawsuit delayed is lawsuit denied p.44

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RESIDENTIAL MORTGAGE LENDING CRITERIA Mortgage Type

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70%

$500K - $5.0 M

5.50%

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5.95%

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Sam Fogell - Western Canada sfogell@lanyardgroup.com 604-688-5388 x103 David Coyle - Ontario dcoyle@lanyardgroup.com 416-509-2940

Phone 604.688.5388 www.lanyardgroup.com

inside VOLUME 7 ISSUE 1 WINTER 2022

LIBERAL GOVERNMENT HOUSING PLAN – A HOME FOR EVERYONE Housing affordability was a hot topic in the recent federal election, and the Liberal Party promised to move forward with a comprehensive housing plan titled A Home. For Everyone. This summary explores that 16-point plan. BY RAY BASI

features 10

CMBA - QUEBEC UPDATE Focus on communicating, connecting and building BY LISA GORDON

OPEN BANKING Open banking will change mortgage brokering BY RAY BASI

While regulatory changes were an important focus in 2021, growing membership was also a priority

CMBA-BC UPDATE CMBA-BC elects first-ever all-woman executive committee BY CHRIS FREIMOND

CMBA-ONTARIO UPDATE

CAN A BORROWER BE THEIR OWN SECURED LENDER?

Charity casino fundraiser highlights

Making sense of disorder BY RAY BASI

CMBA ATLANTIC UPDATE BY CHRIS FREIMOND

A TALE AS OLD AS TIME Housing affordability and the dream of homeownership in British Columbia BY JEFF TISDALE

departments 8 Editorial summary 46 Advertisers Index

columns 28 Industry Profile: CMBA-Ontario’s Petra Keller is a Jill of all trades BY LISA GORDON 38 Off the Clock: In mortgages and municipal government, Darnelda Siegers works to achieve understanding and a clear action plan BY LISA GORDON 44 Legal Ease: Limitations Act: Time – not merit – matters BY RAY BASI

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VOLUME 7 ISSUE 1 WINTER 2022 THE CANADIAN MORTGAGE BROKERS ASSOCIATION DIRECTORS

Sylvain Poirier (CMBA-Quebec) Kimberlee Freeman (CMBA-Ontario) Meg O’Leary (CMBA-Atlantic) Troy Resvick (CMBA-BC) EXECUTIVE DIRECTORS

Carla Giles Petra Keller CMBA - ATLANTIC Mortgage Brokers Association of Atlantic Canada 12 M - 7095 Chebucto Road, Halifax, NS B3L 0A1

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CANADIAN MORTGAGE BROKER magazine is produced by the Canadian Mortgage Brokers Association (CMBA) EDITOR

Keena Hicken-Gaberria STAFF WRITER

Ray Basi MANAGING EDITOR

Kathleen Freimond ART DIRECTOR

Scott Laing SALES AND COORDINATION

Lalania Dykstra BILLING

Debra Hiller CONTRIBUTORS

Ray Basi Chris Freimond Lisa Gordon Keena HickenGaberria Jeff Tisdale IMAGES

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CANADIAN MORTGAGE BROKER © All rights reserved. The views expressed in CANADIAN MORTGAGE BROKER are those of the respective contributors and are not necessarily those of the publisher or staff. PUBLICATIONS MAIL AGREEMENT 41297283 Please return undeliverable Canadian addresses to 202-338 West 8th Ave, Vancouver, BC V5Y 3X2 Printed in Canada by Hemlock Printers Ltd.

Web: mandatemortgage.com Email: mandate.national@gmail.com Phone: 604-731-2899

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editorialsummary

ADAPT AND THRIVE

Embracing the ‘new normal’ as the mortgage industry evolves and changes BY KEENA HICKEN-GABERRIA , INTERIM CEO, CMBA-BC / MBI AND CO-EXECUTIVE DIRECTOR, CMBA

s I write this, 2021 is coming to a close, extremely cold weather is being experienced in Western Canada and a new variant of COVID-19 is causing new health order restrictions across our nation as we near the second anniversary of the start of the pandemic. This preamble could be an opening scene for a seasonal action thriller, but instead, it provides me with the motivation to take pause, reflect on the past year and admire the resiliency that Canadians have demonstrated in overcoming challenges. The mortgage broker industry has also shown the ability to adapt and thrive during these trying times, which I have had the pleasure to personally witness during my term as the interim CEO of the Mortgage Brokers Association of BC (CMBA-BC), the Mortgage Institute of BC (MBIBC) and the co-executive director of the Canadian Mortgage Brokers Association (CMBA) – and with that the editorship of Canadian Mortgage Broker magazine. This issue shines a light on some of the ways that the industry has stepped up to the challenges, embraced what has firmly become the ‘new normal,’ changes to regulations and gives a glimpse to what is yet to come. The catastrophic impacts of climate change became predominant headline news this year across Canada with wildfires, 8

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tornados, heat domes, droughts, floods and windstorms causing havoc and devastation. One of CMBA-BC’s members, Darnelda Siegers, tackled some of these environmental challenges head-on while juggling community demands and government priorities on one hand and serving the needs of her mortgage clients in the other. In our Brokers off the Clock column, learn how Siegers moved from Calgary to Sechelt, entered politics and within eight years became the mayor of Sechelt, while building her practice. We are very pleased to share that my colleague, co-executive director of CMBA Petra Keller, was recognized as one of the industry’s 2021 Women of Influence by Canadian Mortgage Professional magazine. Read about Keller’s passions and how she successfully leveraged her experience in the hospitality industry to advance her career with CMBA-Ontario to lead the organization as its executive director on page 28. Speaking of women of influence, CMBABC has elected an all-woman executive committee, a first in the organization’s 31-year history. More about the women taking the lead and their vision can be learned in the CMBA-BC Update – one of four regional updates that are a new addition to the magazine. CMBA-Ontario presents in pictures how members embraced Vegas

style and hit the jackpot with their first charity fundraiser event held with proceeds going to the Sick Kids Hospital Foundation; CMBA - Quebec’s president, Sylvain Poirier, speaks with the Minister of Finance about issues with new regulations in Quebec and shares the goals of the chapter for 2022; and new regulations were also introduced in the Atlantic region in 2021, the focus of CMBA Atlantic Update. Our Legal Ease column, Limitations Act: Time – not merit – matters, discusses the Ontario Court of Appeal guidance on a case involving the Ontario Limitations Act, which answers the questions of how long claimants have to bring such court claims, and when the clock starts ticking. Another technical piece titled Can a borrower be their own secured lender? sheds light on the unusual but not implausible situation of a real estate owner purchasing a first mortgage, not discharging it from title – thereby taking the position of first mortgage lender – and whether they maintain priority over the second and third mortgages when the property was sold as a result of the real estate owner filing for bankruptcy. One issue that has gained momentum since the start of the pandemic is Canada’s housing crisis, in terms of affordability and supply. This concern was one of the pillars in the Liberal Party’s platform in the most

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This issue shines a light on some of the ways that the industry has stepped up to the challenges, embraced what has firmly become the ‘new normal,’ changes to regulations and gives a glimpse to what is yet to come. recent federal election, and a commitment was made to introduce new programs and incentives to address these problems. The Liberal Housing Plan – A Home. For Everyone summarizes the Liberal Party’s 16-point housing plan and provides a critical assessment of the progress in implementing the plan, and some of the challenges involved, of which all mortgage brokers should be aware. The theme of affordability is addressed further in our market trends article A tale as old as time in which a personal hypothetical scenario in B.C.’s marketplace is examined by one of CMBA-BC’s directors in storybook fashion backed by statistical data. Moving to what the future holds, open banking is on the way, with plans for the first stage to be introduced early in 2023. It carries with it the convenience of quicker sharing of consumer information, but it also carries risks to privacy. It has the potential to alter how

mortgage brokering is done in many sectors of the industry. Our Open Banking on the Horizon article serves to bring awareness of the contemplated changes and is a must-read for mortgage brokers. The new year will undoubtedly bring new challenges, but as I sit and look out at the pristine blanket of fresh snow that fell overnight, I am optimistic that there will be greater opportunities and positive changes that will result in the good outweighing the bad. I am not one for resolutions, instead I prefer to be mindful of gratitude. I am ever so grateful of the tremendous team that I have had the pleasure to work with who work tirelessly behind the scenes and are instrumental in the creation of this publication. Lalania Dykstra, Kathleen Freimond, Scott Laing, Aidan Battley, Ray Basi, Carol Martin and Debra Hiller – thank you for everything that you do! It has been a pleasure working with the past and current members of the three boards of directors during my interim term, and I am grateful for the opportunity to work with organizations that are committed to positive and progressive advancements. One change that I look forward to is the passing of the baton to a new permanent leader to take the reins as executive director for CMBA-BC / MBIBC and coexecutive director for CMBA. I wish them much success in their new role – you have a great team to help you along the way. To our magazine contributors, advertisers and readers – without you, this publication would not exist. Thank you for your continued support! To all, happy New Year and may 2022 bring you great joy, good health, prosperity and peace. Treat each day as a blessing, and be kind to one another.

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cmbaquebecupdate

GOALS AND GROWTH 10

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This year, CMBA - Quebec has had great success raising its profile with the industry, the media, and the public. Despite challenges created by COVID-19, communication was a priority in 2021.

Focusing on communicating, connecting and building BY LISA GORDON

t’s been a year of concentrated building for the Quebec chapter of the Canadian Mortgage Brokers Association (CMBA - Quebec). Founded a little over three years ago, the provincial association is under the leadership of president Sylvain Poirier, who was also elected as vice-president of CMBA’s national board in September 2021. The organization’s goal is simple: to represent the interests of Quebec mortgage brokers and to advance the industry through government advocacy and communications. Poirier told Canadian Mortgage Broker that CMBA - Quebec welcomed two new board members last fall: Amelie Des Lauriers and Alejandro Luca. Now numbering 10, the board includes representatives from the broker and lender communities. “We are seeking to add maybe two more lenders,” he said. “I know it’s a lot of people, but I believe that the more ideas we have, the more successful we will be.” Poirier created several board committees with a dedicated focus on areas such as partnerships, governance, annual symposium planning, broker relationships and communications. The entire board meets 10 times per year, with committee leaders reporting on their progress. CMBA Quebec has made astonishing strides under Poirier’s leadership – especially during a global pandemic. On November 9, he testified before a parliamentary committee on public finance. The purpose was to refine Bill 141, an act aimed at improving regulations pertaining to Quebec’s financial sector, including the mortgage industry. “We had to change regulators in 2020, so in 2021 we were fine-tuning those

changes,” he explained. “I was invited to the parliamentary commission for the Ministry of Finance, and I spoke with the Minister of Finance about the issues we have with the new regulations.” During the hearing, Poirier proposed amendments to the law, which he hopes will be adopted, he said. These changes, among others, will allow a longer period of 14 business days for real estate brokers to obtain a mortgage loan. “Here in Quebec, we have regulations protecting the public when it comes to

CMBA - QUEBEC BOARD OF DIRECTORS President Sylvain Poirier (DLC) Vice-President Peter Quinn (M3) Administrator Benoit Angers Ste-Marie (M3) Administrator Alejandro Luca (DLC) Administrator Amélie Des Lauriers (DLC) Administrator David Favreau (Hypotheca) Administrator Claude Fugère (M3) Administrator Claude Lalumière (Hypotheca) Lender Administrator Benoit Bourque (First National) Lender Administrator Danny Antoniazzi (Equitable Bank)

the quality guarantee of the property,” he continued. “Those are very strict guidelines, and in my opinion, they are the best guidelines to avoid future disputes. During the pandemic, realtors were asking lenders to provide some final mortgage acceptance letters. That put a lot of pressure on the market. When you remove the home inspection, you remove the quality guarantee on the property. Our recommendations give us 14 days to protect the public the way the regulations intend.” This year, CMBA - Quebec has had great success raising its profile with the industry, the media and the public. Despite challenges created by COVID-19, communication was a priority in 2021. “We had to be very creative to keep the association alive and stay in touch with our members,” said Poirier. “We do a lot of virtual things to show we are still present. We are also planning an in-person symposium in mid-September 2022 in Montreal. The regulator will be invited, and members should stay tuned for more information on that.” He hopes to grow voluntary association membership to 25 per cent of the provincial industry, up from the current 13 per cent. “We’re just working hard right now. We’ll be able to meet each other soon, and we’ll be very well structured with the best board we’ve ever had. The foundation of the association is in place. It’s very solid and we’ll lift it up in 2022. “We are transforming the mission and value of the organization and working on a long-term strategic plan,” concluded Poirier. “At the end of day, when we all leave, this needs to live beyond us. The organization has to have its own life. So we will work the strategy over a long period of time.” CMB MAGAZINE

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openbanking

Open banking will change mortgage brokering

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

ortgage brokering is very likely on the cusp of a seismic change – the result of Canada moving toward structured and regulated open banking. While government policy appears to be clearly and quickly moving in that direction, the nature and degree of change will depend largely on the details in the yet-to-be-determined legislation and regulations. Mortgage brokers would be well advised to keep abreast of these developments to ensure they are ready to adapt as and when needed.

WHAT IS OPEN BANKING? In basic terms, open banking is a system that allows for transfer of consumers’ financial data between financial institutions. Details in definitions relating to speed, efficiency, purposes, goals and consumer control merely describe the characteristics of particular visions of open banking. Hence the definition of open banking used by the Advisory Committee on Open Banking (Committee) appointed by Canada’s Department of Finance is very telling. The committee, in its Final Report issued in April 2021 and released to the public on August 4, 2021, recommended that open banking be operational by January 2023. The Final Report defines open banking as: … a system that allows consumers to securely and efficiently transfer their financial data between financial institutions and accredited third-party service providers in order to access services that can help them improve their financial outcomes. The definition includes goals, aspirations and parameters that 12

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the open banking system include secure and efficient transfers, accredited third parties and improved financial outcomes for the consumer. The definition being used by the Committee makes it clear that it supports a fairly structured robust system rather than one that develops more organically.

SCREEN SCRAPING – THE CURRENT STATE OF OPEN BANKING Financial institutions already use a form of open banking to collect, analyze and access large amounts of customer financial data including borrower information, credit history and financial circumstances. They generally do not share the gathered information with other financial institutions. Much of this crude form of open banking is referred to as ‘screen scraping.’ Screen scraping is presently used by approximately four million Canadians and involves the borrower providing their online banking username and password to an entity that uses new technology to automate the delivery and use of financial services (commonly referred to as a fintech). The fintech uses this information to log into the borrower’s financial institution accounts and data, as if it were the borrower, and scans and scoops the borrower’s financial history and copies it to an external database. That database is then used to provide the borrower with products and services. This process gets around the fact the financial institutions do not share financial information they have gathered and gives the borrower access to data-driven financial services.

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ANKING ON THE HORIZON BENEFITS AND RISKS TO BORROWERS OF SCREEN SCRAPING Screen scraping can provide borrowers with benefits, including easier transferring of data between potential lenders, faster transferring of data between potential lenders and faster adjudication of loan applications. However, screen scraping is unregulated, unsecure, inefficient and unreliable. It creates data-protection, privacy and cybersecurity risks for consumers and financial institutions. Among the problems are the following: n Other than the general protection provided by protection of privacy legislation, fintechs are not regulated as to what information they access, how they access the information, to whom they disclose the information, how the information is stored and for how long they keep the information. n There are no required standards or processes concerning screen scraping. n Fintechs do not need to meet any qualification criteria to be authorized to screen scrape. n Once the borrower provides the username

and password to the fintech, the borrower loses control of the related financial information (including account balances, details of investment portfolios, the history of transactions, and the history of using other financial products and services). n The borrower, in most cases, will not have limited the length of time the fintech can have access to the financial data (although this could be possibly overcome by changing the username and password). n The borrower’s sharing of the username and password may void the financial protection the financial institution offers against unauthorized transactions. n The sharing of the information by the borrower creates more opportunities for the borrower to be hacked and the data to be breached. n Financial institutions are an attractive target for hackers, given the amount of personal financial information they store. The target becomes even more attractive when the quantity of data is increased by open banking links and is even more vulnerable due to those same links.

The reality of the privacy risk presented by screen scraping is demonstrated by Plaid Inc. agreeing to pay $58 million to settle a California-based class action lawsuit and agreeing to change its business practices in ways that better protect privacy. Plaid Inc. is a fintech that helps users connect their bank accounts to their apps. The claim was that it used dubious tactics to obtain login particulars for individuals’ financial institution accounts and then used those particulars to obtain private transaction histories, investment histories, income information and other personal information. The Committee concluded that “(a)s screen scraping proliferates, so too will the associated risks.”

A BALANCED SOLUTION The Committee concluded that the market has demonstrated a demand for data sharing services and for consumers to be allowed do more with their financial information. It stated: Implementing a system of open banking is about enabling secure, efficient, consumerCMB MAGAZINE

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permissioned data sharing – realizing Canadians’ right to data portability and allowing them safe and convenient access to a comprehensive picture of their finances.

COMMITTEE RECOMMENDATIONS The Committee made 34 recommendations in the following six categories as to the type of open banking suitable for Canada: vision, scope, governance, common rules, accreditation and technical standards. Following are some of the highlights. n The vision of open banking should be one that focuses on the consumer, including protecting consumer data; consumers being in control of their data; giving consumers access to a wider range of useful, competitive

and small and medium enterprises should be allowed to participate from the very beginning, but their consent should be obtained before they provide any reciprocal data access. Participants should not be permitted to make giving this consent a condition of access to a product or service. n The scope of data available in open banking initially should be that which is traditionally readily available to consumers through their online banking applications. This leaves room to expand the scope of data in the future. Financial institutions should be able to exclude data they enhanced to provide additional value or insight to the consumer, such as internal credit risk assessments or new product offerings.

...change is coming both to open banking and mortgage brokering; mortgage brokers need to keep informed as open banking develops and adjust as circumstances warrant.

and consumer-friendly financial services; giving consumers reliable and consistent access to services; giving consumers recourse when issues arise; and having consumers benefit from consistent consumer protection and market conduct standards. It should benefit all Canadians, including those who are financially marginalized or who work in non-traditional employment settings (such as gig workers). Financial education policies, programs and resources should assist with financial inclusivity. Importantly, open banking should be a collaborative effort between government and industry. Government should set the rules, and industry should implement and administer the system. n The scope of participants involved in open banking should include all federally regulated banks; provincially regulated financial institutions, such as credit unions, who choose to participate; and other entities who meet accreditation criteria and follow the rules of the open banking system. Individuals 14

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However, if this data is readily available to the consumer, the financial institution should have to justify excluding it. The initial scope of the program should allow third-party service providers (that is fintechs) to receive consumer financial data, but not edit it on the financial institution’s servers. Consideration to changing this in the future should be given. The data should not be permitted to be used for underwriting insurance. n A two-phased approach to governance should be adopted as establishing and implementing a formal governance entity and legislative framework could take multiple years. In Phase 1, the government should appoint a lead to advance the design and early implementation of an open banking system. The lead should develop common rules, an accreditation framework, and processes to allow third-party service providers to participate in the open banking system. By the 18-month mark of the lead being appointed, consumers should be able

to access open banking services at an initial stage level. Phase 2 should begin by January 2023. This phase would focus on transferring administration from the appointed lead to the governing entity created by the government during Phase 1. The entity would be run by open banking stakeholders, but the government would set the entity’s mandate and objectives. In Phase 2, the government would also consider codifying parts of the system implemented by the lead. n Common rules should be developed that apply to open banking relationships, such as between banks and third-party service providers, regardless of an agreement otherwise. The common rules should include matters of liability (such as for misuse of information), privacy (such as requiring express consent of consumer regarding exchanging their data) and security (such as data security and infrastructure security). n Accreditation criteria and audit requirements should be established that balance the entry of third-party service providers into the open banking system with robustly protected consumer data. The criteria should assess the participants’ operational, financial, privacy and security fitness. n Technical specifications and standards should be set regarding matters such as data transfer and storage, consumer experience with the system interface, consumer authentication and consent management.

TAKEAWAYS Open banking is on the horizon. Mortgage brokers will be impacted. While open banking can address issues such as speed and convenience in the mortgage application process, it does not provide the consumers with qualified, neutral advice to equip borrowers to make informed borrowing choices. Mortgage brokers will need to know where and how their services best fit into the adjusted mortgage arranging process. Because the details as to type of open banking Canada will adopt are not yet determined, mortgage brokers cannot determine the changes they will need to make. However, change is coming both to open banking and mortgage brokering; mortgage brokers need to keep informed as open banking develops and adjust as circumstances warrant.

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cmbaatlanticupdate

NEW LICENSING REGULATIONS IN NOVA SCOTIA While regulatory changes were an important focus in 2021, growing membership was also a priority BY CHRIS FREIMOND

ew licensing regulations for mortgage brokers that came into effect in Nova Scotia on November 1 last year have been a major focus of CMBA Atlantic over the past few months, says Jim DeCoste, vice president, CMBA Atlantic and co-owner of Dominion Lending Centres Maritime Mortgage Group in New Glasgow, Nova Scotia. Under the Mortgage Regulation Act, mortgage professionals now need to meet education and licensing requirements to operate in the province. The provincial government says the changes were required to protect homeowners and buyers when financing a home through a mortgage broker. DeCoste says CMBA Atlantic worked closely with the government regulators to develop new legislation to replace the Mortgage Brokers’ and Lenders’ Registration Act and regulations. The legislation introduces five new licences: n Mortgage Brokerage Licence n Mortgage Broker Licence n Associate Broker Licence n Mortgage Lender Licence n Mortgage Administrator Licence Licences will need to be renewed annually by November 1. In addition to the licences, there are new rules and procedures for mortgage brokerages, brokers, lenders and administrators. There are also new annual licensing fees. Brokers and associate brokers pay an annual licensing fee of $300. Brokerages, lenders and administrators pay an annual fee of $600. To be eligible to apply for a licence, a person must be 19 or older and their employer needs to have a mortgage brokerage licence. The principal broker needs to apply for the licence on behalf of the applicant.

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The criteria for being granted a licence include Canadian residency and completion of the Nova Scotia Mortgage Broker Education Program. Experienced brokers – defined as someone who held a Mortgage Broker Permit, was employed to broker mortgages by a licensed mortgage brokerage or brokered mortgages for an exempt federally regulated financial institution under the Mortgage Brokers' and Lenders' Registration Act for 24 of the 36 months immediately before applying – need to complete the Mortgage Broker Education Program before renewing their licence in October 2022. However, brokers are exempt from completing the Nova Scotia Mortgage Broker Education Program if they are currently licensed as a mortgage broker (or equivalent) in a recognized province: Alberta, British Columbia, Manitoba, New Brunswick, Ontario, Quebec and Saskatchewan. The new regulations also include a range of requirements for how brokers describe themselves in marketing material such as websites, social media, business cards, letterheads and media advertising. “The different licensing categories mean that brokers must now make it clear in all this public-facing material what they are licensed for,” says DeCoste. “For example, if someone has previously described themself as a mortgage broker but is now licensed as an associate broker, they need to change all their marketing material

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to reflect that change. They also need to display their license number and the name of the brokerage firm they work for.” New disclosure and compliance forms were also introduced by the regulatory changes, says DeCoste. The Association feels some of them are unnecessarily repetitive and difficult to understand and is continuing to consult with the regulators to see what improvements can be made. DeCoste says Nova Scotia’s new rules are in line with similar changes brought in by the Government of New Brunswick in 2016. He notes that consultations with the Nova Scotia regulators while the new rules were being developed in 2020 and communicating them to brokers in the region was challenging because of the COVID-19 pandemic and a very busy year for brokers in the province. “The Atlantic Canada region was booming, and – like all other areas – we've seen a huge growth in mortgages,” says DeCoste. “The regulatory changes are quite extensive, but finding time to talk to busy brokers about them and what they would need to do to meet the new requirements was not easy.” Nevertheless, the Association felt it was important to make the effort to keep talking to the regulators and communicating with brokers. “At one of our first board meetings after we heard about the new regulations, we said: ‘These changes are coming, so we had better start communicating sooner rather than later’ – and that’s what we did,” he adds. DeCoste says the provincial regulators were co-operative and helpful and kept the Association well informed of the changes and the timelines. They were also willing to listen to the Association’s comments and concerns and took them into account when finalizing the new regulations. “Some of the changes were quite complex and not very easy to understand. So we needed to make sure that we as a board understood them so that we could explain them to our members,” he says. While the changes in Nova Scotia meant considerable extra work for the CMBA Atlantic board, DeCoste says it’s all part of the value the Association provides for members. “For much of the time, members of most associations don’t really see what goes on in the background,” he says. “In some ways it was like that for us with the regulatory changes in Nova Scotia, but by communicating with members and letting them know what was coming and how they needed to prepare, we demonstrated the value of membership.” And even though board members had their regular jobs to take care of, they were aware of how important it was to give back to CMBA Atlantic and the industry as a whole by being fully engaged in working with the Nova Scotia regulators and communicating with members, adds DeCoste. While regulatory changes in Nova Scotia were an important focus of CMBA Atlantic in 2021, the Association also needed to look after the interests of members in the broader region,

says DeCoste. This included finding the best way to communicate during COVID restrictions. “Just like other industries and associations, we were forced to change the way we do business,” he adds. “We needed to move away from in-person conferences and social events but still find ways to show value to our members and the industry.” This was achieved in part through activities such as regular weekly Zoom meetings, which have worked well for brokers and lending partners. “We schedule one or two Zoom meetings a month depending on the demand. It’s an opportunity for lenders to talk about their niche products and provide pointers to help brokers conduct their business more successfully or find solutions for clients who may not have typical needs,” says DeCoste. Growing the Association’s membership has also been an important activity for the board, he says. Specific initiatives to attract new members have included discounted membership fees for brokers who have recently entered the industry. “We felt it would be a way to help new brokers reduce their startup expenses, and also benefit from being a member and access educational programs and mentorship opportunities,” says DeCoste. He adds that the CMBA Atlantic team did “a great job” in 2021 and looks forward to continuing to grow CMBA Atlantic and providing value for members in 2022.

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CMBA-BC ELECTS FIRST-EVER ALL-WOMAN EXECUTIVE COMMITTEE Growing CMBA-BC’s membership and improving communication with members are priorities BY CHRIS FREIMOND

“T

he times are changing” is Deb White’s simple yet meaningful characterization of the unprecedented election of an all-woman four-member executive committee to help guide the day-to-day operations of the Canadian Mortgage Brokers Association of British Columbia (CMBA-BC) for the next two years. It's the first all-woman executive committee in the Association’s 31-year history, and White is only the fourth woman to ever be elected to lead the board. White, a mortgage broker with White House Dominion Lending

Centres in Vernon, B.C., is joined by vice-president Marci Deane, a broker with Mortgage Architects in North Vancouver; secretary Jane Wakelyn with Dominion Lending Centres in Prince George; and treasurer Caroline Roach, a broker with Fitzwilliam Mortgage Corp. in Nanaimo on Vancouver Island. White has previously served as treasurer on the executive board and Deane as secretary. The Association’s 11-member board of directors, currently comprising six men and five women, is elected by CMBA-BC members. The full board then elects the four-person executive committee.

Above from left: The all-woman executive committee are (from left) president Deb White, vice-president Marci Deane, secretary Jane Wakelyn and treasurer Carolyn Roach. 18

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White says it is significant in an industry dominated by men – only 34 per cent of CMBA-BC’s 1,230 members are women – that an all-woman executive committee was elected for the first time. “It shows that times are changing, women are making headway, we are making our voices heard,” she says. White notes that while the executive committee does not make final decisions without consulting the full board of directors, it is in effect the ‘voice’ of the board, and the board expects the executive committee to represent it appropriately. For White and her executive committee colleagues, that means setting an agenda that meets the needs of members. “Our priority will be on growing the Association’s membership and improving communication with members,” she says. “We are going through very challenging times, and we need to listen to brokers, hear what they are saying and respond in the right way. That’s my focus going forward.” Top of the list is education, says White, who believes many brokers finish their licensing course and then face the challenge of how to actually do business. “How do I get a deal? What do I do with that deal, and how do I present it to my lender? How do I find out who the lenders are? These are the type of questions we are getting, and I think it’s up to the Association to help educate the brokers and teach them the skills of the trade,” she adds. “I want to amp that up, and so does the board.” White says brokers across Canada are currently facing a great deal of uncertainty. “We don't know what's happening with interest rates, we don't know if the market's going to crash, we don't know if we're going to go forward, or if we're going to go down,” she says. “And of course, each market is different. I live in a very small community and right now we are booming, whereas other communities have fallen flat. So it's very hard to focus on everything, and that's why I say there’s uncertainty.” To some degree, the uncertainty is fuelled by the rapid rise in real estate prices. “If anyone had said we would see an increase of around 49 per cent from 2020 to 2021, we would have laughed, but now that’s become our norm,” says White. “So if it slows

down next year, we are all going to be saying ‘my goodness, what’s happening?’ We need to prepare ourselves for that.” White says the new executive committee can help address the uncertainty by bringing a province-wide perspective to the challenges facing the Association’s members. “Each one of us is from a different region – the Lower Mainland, Vancouver Island, Northern B.C. and the Interior – and that diversity will give us a broader provincial voice and help ensure we have even more information to guide brokers and assist them to meet their challenges,” she says. The executive committee will also be reaching out to new brokers coming into the industry to make sure they are aware of what the Association has to offer. “I think some of the newer brokers know about CMBA-BC, but they don’t know much about the board of directors and what we

focus on broker education to make sure that brokers are knowledgeable on each and every subject and aspect of their business, because their clients are relying on them for that information,” she says. White says the Association has done great work in recent years to improve public perception of brokers and positioning them as the go-to source for the widest range of mortgage options. “We need to keep that up and make sure consumers know we're here for them,” she adds. Newly elected vice-president Marci Deane says she is thrilled to be on the executive committee and to be able to give back to her colleagues in the industry. “Mentorship and education have had an immense impact on my success, and I’m committed to focusing on this aspect of the Association,” she says.

All four members of the executive committee are veteran mortgage brokers who are embracing this unique challenge with a forward vision focused on supporting the Association’s efforts to drive positive change. do. I’m hoping to get our more seasoned brokers involved in getting that message out,” says White. Part of that initiative will be more education and information seminars for brokers and public service announcements to enhance public perception of the industry. Initially, the board will be the proactive party in the outreach to brokers, but White’s goal is to make brokers sufficiently aware of what’s on offer that they initiate contact with the board. While there are several factors impacting the real estate market over which brokers have little or no control – such as possible changes to the government’s stress test, the prime rate and new regulations affecting the industry – they can and must play a role in advising their clients and being a sounding board, says White. “That’s why we, as an Association, need to

Secretary Jane Wakelyn says her election will allow her and the other executive board members to pursue new goals and initiate change on behalf of members. The new treasurer, Caroline Roach, says she is also looking forward to giving back to the industry that has served her so well. “Brokering not only allowed me to help people achieve their homeownership dreams but also provided me with the flexibility to balance motherhood while building my career,” she adds. All four members of the executive committee are veteran mortgage brokers who are embracing this unique challenge with a forward vision focused on supporting the Association’s efforts to drive positive change. They are also all recognized by the industry and within their local B.C. communities for continually giving back to help make a difference where they work and live. CMB MAGAZINE

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A TALE AS OLD AS TIME

Housing affordability and the dream of homeownership in British Columbia BY JEFF TISDALE

magine housing affordability looked upon as an analogy for Beauty and the Beast. Those of us who can claim homeownership (seemingly regardless of length of time these days) have benefited quite well from the beautiful rise in market valuation. A lot of paper millionaires to be sure. The beastly part of our story unfortunately involves the disappearing dream of homeownership for our kids, or even the ability to climb the property ladder. At our house, my wife and

I share the latter concern for both of our kids, who are now in the university phase of their lives and, like many of their friends, face a near impossible reality of getting into a home they can call their own. The tables below will illustrate how hard this task is and how it may get even more difficult in the coming years. With our daughter on track to be the first of our kids to finish university, I thought I would look at housing opportunities through her eyes using these milestones: (a) The year she was

born; (b) the year she graduated from high school; and (c) (hopefully) when she’ll finish her undergrad degree. When we welcomed our daughter to our family in 2000, for the most part housing access/affordability was not really on the radar. Sure, Vancouver was pricier than the rest of the province and has always carried that mantle since it was announced that Canadian Pacific Railway would name the city as its western terminus.

Monthly Mortgage Gross Median Down Payment1 Debt Assessed Payment Amount of (7.75% Servicing Community Property Type Value 5% Mortgage 5 year) Ratio2 ‘Affordable?’

2000

Vancouver

Kelowna

Prince George

Chilliwack

Nanaimo

Cranbrook

Attached

$257,750

$12,888

$244,863

$1,830

43%

Condo/Apartment

$153,400

$7,670

$145,730

$1,089

26%

yes

Detached

$339,000

$16,950

$322,050

$2,406

57%

Attached

$153,400

$7,670

$145,730

$1,089

26%

yes

Condo/Apartment

$107,900

$5,395

$102,505

$766

18%

yes

Detached

$161,200

$8,060

$153,140

$1,144

27%

yes

Attached

$88,600

$4,430

$84,170

$629

15%

yes

Condo/Apartment

$80,300

$4,015

$76,285

$570

13%

yes

Detached

$117,500

$5,875

$111,625

$834

20%

yes

Attached

$103,800

$5,190

$98,610

$736

17%

yes

Condo/Apartment

$75,200

$3,760

$71,440

$533

13%

yes

Detached

$148,600

$7,430

$141,170

$1,055

25%

yes

Attached

$118,000

$5,900

$112,100

$837

20%

yes

$82,450

$4,123

$78,328

$585

14%

yes

Condo/Apartment Detached

$134,100

$6,705

$127,395

$952

22%

yes

Attached

$91,600

$4,580

$87,020

$650

15%

yes

$81,100

$4,055

$77,045

$575

14%

yes

$104,900

$5,245

$99,655

$744

18%

yes

Condo/Apartment Detached

1 To my banking friends, please excuse the oversimplification used in my tables to present the basis of my story. I know that there are other payments that should be included in my mortgage payment and debt servicing calculations, so for simplicity we’ll ignore various

fees for (a) high ratio application/underwriting (b) strata and (c) property taxes. As well, in keeping with simplicity, I have also used the Median Canadian Family Income, as reported by StatsCan for 2000 and 2015. To arrive at the 2018 figure, I applied an annual gross up figure of 3% per year. 2 The percentage of your monthly household income that covers housing costs, such as your mortgage principal and interest, taxes, heating expenses and half of the condo fees (if applicable). should not be more than 32%. Source: CMHC

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It’s worth noting that in 2000 “affordable housing” was even then at the outrageous five-year fixed/closed rate of 7.75% – and that’s across all housing types – detached

(single family home), attached (townhouse) and condo. The key point here being that for almost every market, the choice of housing type was an option.

Let’s consider high school graduation (which for my wife and I, seems like so long ago now), it was 2018, in the waning pre-COVID years – how the world has changed!

Monthly Gross Mortgage Gross Qualifying Debt Median Down Payment1 Debt Payment Servicing Assessed Payment Amount of (3.19% Servicing (5.34% Ratio/ Community Property Type Value 5% Mortgage 5 year) Ratio2 ‘Affordable?’ 5 year) Qualify2

2018

Attached

Vancouver

Condo/Apartment Detached

Kelowna

Prince George

Chilliwack

Nanaimo

Cranbrook

n/a

‘Qualify?’4

$1,204,000

n/a

$686,000

$34,300

$651,700

$3,148

49%

n/a

$1,874,000

n/a

Attached

$431,000

$21,550

$409,450

$1,977

31%

yes

$2,461

38%

Condo/Apartment

$299,000

$14,950

$284,050

$1,372

21%

yes

$1,707

27%

yes

Detached

$629,000

$31,450

$597,550

$2,886

45%

n/a

Attached

$193,800

$9,690

$184,110

$889

14%

yes

$1,106

17%

yes

Condo/Apartment

$135,400

$6,770

$128,630

$621

10%

yes

$773

12%

yes

Detached

$283,000

$14,150

$268,850

$1,298

20%

yes

$1,616

25%

yes

Attached

$384,000

$19,200

$364,800

$1,762

28%

yes

$2,192

34%

Condo/Apartment

$186,000

$9,300

$176,700

$853

13%

yes

$1,062

17%

yes

Detached

$581,000

$29,050

$551,950

$2,666

42%

n/a

Attached

$335,000

$16,750

$318,250

$1,537

24%

yes

$1,913

30%

yes

Condo/Apartment

$248,650

$12,433

$236,218

$1,141

18%

yes

$1,419

22%

yes

Detached

$454,000

$22,700

$431,300

$2,083

33%

n/a

Attached

$242,100

$12,105

$229,995

$1,110

17%

yes

$1,382

22%

yes

Condo/Apartment

$111,200

$5,560

$105,640

$510

yes

$635

10%

yes

Detached

$279,100

$13,955

$265,145

$1,280

20%

yes

$1,593

25%

yes

2 The percentage of your monthly household income that covers housing costs, such as your mortgage principal and interest, taxes, heating expenses and half of the condo fees (if applicable). should not be more than 32%. Source: CMHC 4 Technique applied is IBM SPSS Forecasting 22, refer to IBM paper: http://www.sussex.ac.uk/its/pdfs/SPSS_Forecasting_22.pdf

Unaffordability – like the crazy mob storming the Beast’s castle – has taken root and is spreading. With median assessed values for Vancouver’s attached and detached properties breaking through the $1,000,000 barrier high-ratio financing is becoming a much harder option to use as an entry point into homeownership. Layer on the new ‘qualifying rate’ for prospective homebuyers and, in Vancouver, the ability to enter the housing market and even climb the property ladder is drifting out of reach, especially for those earning the median family income in Canada. For the first time, unaffordability starts to enter discussions in suburban communities like Kelowna, Chilliwack and Nanaimo, where it was almost an expectation that “anyone could buy a home in these markets.” The earlier comments about first-time homebuyers having an option, or choice of dwelling type, is no longer present. CMB MAGAZINE

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2026

Vancouver

Kelowna

Prince George

Chilliwack

Attached

$2,056,607

n/a

Condo/Apartment

$1,055,191

n/a

Detached

$3,641,501

n/a

Attached

$839,758

$41,988

$797,770

$3,805

47%

n/a

Condo/Apartment

$556,523

$27,826

$528,697

$2,553

31%

yes

$3,178

39%

Detached

$1,318,885

n/a

Attached

$263,945

$13,197

$250,748

$1,211

15%

yes

$1,507

19%

yes

Condo/Apartment

$169,602

$8,480

$161,122

$778

10%

yes

$968

12%

yes

Detached

$407,911

$20,396

$387,515

$1,871

23%

yes

$2,329

29%

yes

Attached

$901,124

$45,056

$856,068

$4,135

51%

n/a

$440,428

$22,021

$418,407

$2,021

25%

yes

$2,515

31%

yes

$1,210,368

n/a

Condo/Apartment Detached

Nanaimo

Cranbrook

‘Qualify?’4

Attached

$615,401

$30,770

$584,631

$2,824

35%

$3,514

43%

Condo/Apartment

$516,267

$25,813

$490,454

$2,369

29%

yes

$2,948

36%

Detached

$965,014

$48,251

$916,763

n/a

Attached

$374,721

$18,736

$355,985

$1,719

21%

yes

$2,139

26%

yes

Condo/Apartment

$135,513

$6,776

$128,737

$621

yes

$773

10%

yes

Detached

$402,145

$20,107

$382,038

$1,845

23%

yes

$2,296

28%

yes

2 The percentage of your monthly household income that covers housing costs, such as your mortgage principal and interest, taxes, heating expenses and half of the condo fees (if applicable). should not be more than 32%. Source: CMHC 3 2026 Income = Estimated 2015 Median Family Income increased annually by 3% to 2026 4 Technique applied is IBM SPSS Forecasting 22, refer to IBM paper: http://www.sussex.ac.uk/its/pdfs/SPSS_Forecasting_22.pdf

As our good friend Lumiere said, “You don’t have time to be timid; you must be bold and daring.” With a little foreshadowing of what lies ahead for more communities in British Columbia, the detached home is, for the first time, out of reach in these markets, with Cranbrook and Prince George on the same trajectory. In 2026 our daughter will have finished university, picked up her first full-time ‘career’ job and be earning a reasonable income. Granted (for arguments sake) her income is less than the 2026 predicted median income3, so her affordability and qualification numbers will look a little worse than what is shown in these calculations. Should the current escalation in assessed property values continue – if market growth continues at the same pace we’ve seen over the past 10 years – first-time homeowner22

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ship in our selected communities (above) looks bleak. Granted while this ‘prediction’ is a ‘best guess’ attempt4, it’s important to highlight a few key estimated outcomes: Much like Vancouver, Kelowna and Nanaimo both become largely unaffordable for first-time homebuyers, and Chilliwack is not too far behind. Chilliwack detached values (median) eclipses $1.2 million largely supported by the ongoing migration from Metro Vancouver to the Fraser Valley. Prince George and Cranbrook have remained ‘affordable’ across all broad property types. Despite all the doom and gloom around affordability, I believe that there is hope. The many professional associations

that represent their members throughout British Columbia and beyond are filled with very knowledgeable and innovative people who do not lack for ideas. Whether it’s the Canadian Mortgage Brokers Association, Canadian Mortgage Professional, Real Estate Institute of BC, Appraisal Institute of Canada or the various real estate boards, the importance of pushing all levels of government for policies to recognize new ownership possibilities as well as smarter financing policies has never been greater. As our good friend Lumiere said, “You don’t have time to be timid; you must be bold and daring.” Jeff Tisdale is CEO at Landcor Data Corporation.

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GLITZ & GLAMOUR CMBA-Ontario Charity Casino Fundraiser Highlights

CMBA-Ontario held its first charity casino fundraiser on November 18, 2021 at the Universal EventSpace in Vaughan. About 200 people attended the Las Vegas-themed event with its game tables, music, giveaways, a magician and photo booth to capture the fun experience. This successful evening raised a whopping $25,000 to support the SickKids Foundation, the organization that raises funds on behalf of The Hospital for Sick Children (SickKids). "We thank all those who attended and our sponsors – without them this event would not have been possible. We look forward to doing it again," says Petra Keller, executive director of CMBA-Ontario. 1.

Enjoying the evening are (from left) Rose Lirantzis, Roberto Blanco, CMBA-Ontario-chair of events and treasurer Kimberlee Freeman, the association’s chair of education and past president.

2. Sina Lachcik (left) chats to other guests as she considers her options. 3. Guests enjoying the win! 4. From left: Tracy Bennett, Jodi Hiltz and Jodie Erwin with two of the showgirls who added some Vegas style to the event. 5. Three guests ready to have some fun at the event.

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6. Reaza Ali, CMBA-Ontario vice president, Shubha Dasgupta, president and Roberto Blanco, the association’s chair of events and treasurer. 7.

Place your bets! Natalia Jackson and Narissa Khan try their luck at the table.

8. “What number am I thinking of?” 9. Petra Keller, CMBA-Ontario’s executive director with the showgirls whose colourful boas and glitzy costumes provided plenty of panache at the event. 10. Ed Karthaus of title sponsor Home Trust welcomes guests to the fundraiser. 11. One the evening’s winners Sofia Hondrogiannis with Reaza Ali.

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industryprofile

CMBA-Ontario’s Petra Keller draws on her hospitality roots when it comes to planning association events that emphasize education and networking BY LISA GORDON

IT’S ALL IN THE P

etra Keller is a Jill of all trades. Growing up, she worked in her parents’ restaurant as a server, bartender, cook and bookkeeper. That ability to multi-task has been essential to Keller’s success in her current role as executive director of the Ontario chapter of the Canadian Mortgage Brokers Association (CMBA-Ontario). After leaving the restaurant industry, Keller moved to various positions in the corporate world. She worked for a technology company, a sports medicine clinic and a printing company in administrative and bookkeeping roles. Then, in July 2013, she landed a role at what was then called the Independent Mortgage Brokers Association of Ontario (IMBA), now known as CMBA-Ontario. Keller got a taste for event planning when she worked as a wealth adviser assistant and helped organize some parties for the brokerage side of the business. After taking a maternity leave, she returned to the industry and applied for a new position as an entry-level administrator with IMBA. She began assisting various directors, and her job responsibilities grew. That role was eventually divided into three positions, and Keller decided to focus on event planning. “Hospitality is in my blood,” she told Canadian Mortgage Broker during a recent interview. “I wanted to be out with the

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people and not in the office all the time.” Her foray into event planning, plus her wide-ranging experience, helped Keller assume the office manager role before she finally landed in the executive director position. Keller is certainly using those event-planning skills in her current job. After acting in an interim capacity since March 2020, she officially took the reins of CMBA-Ontario in October of that year. She noted that while the COVID-19 pandemic has brought new opportunities to the mortgage industry, it has also introduced many new event planning challenges, thanks to lockdowns and physical distancing requirements. “People need to feel united and have spirits elevated during this time,” said Keller. “We wanted to make sure we delivered safe events.” That meant pivoting on a dime, with restrictions constantly changing and events needing to be retooled, sometimes with less than 24 hours’ notice. One of those safe events drew a record crowd to an in-person professional development seminar on September 29, 2021. “We understand that time is money,” said Keller, so the seminar was planned as a halfday event that allowed people to return to the office in the afternoon. In October 2021, 150 golfers attended a successful tournament at The Carrying Place Golf and Country Club in King, Ont.

In addition, a November “Viva Las Vegas” charity casino night (see page 32) at Vaughan’s Universal EventSpace attracted close to 200 participants. The event raised $25,000 for SickKids Foundation, the organization that raises funds on behalf of The Hospital for Sick Children (SickKids). “At many of the events pre-pandemic, we had 150 to 200 people in attendance. During the pandemic, I expected attendance to drop. However, it seems to have increased. People were excited to be able to network again in person,” said Keller. The pandemic has brought unique challenges for the future of the mortgage industry. She sees increasing house prices and inflation as two of those hurdles. “People who qualified for financing five years ago might not be able to now.” Keller wants to ensure CMBA-Ontario’s members are informed, and their clients are in turn informed, and up to date with regulations. EDUCATIONAL FOCUS During her eight years with the association, Keller has seen some changes. “More people are craving education. With the ever-changing landscape of the industry, it’s important to know that knowledge is power.” She said many new people are entering the industry, and they sometimes don’t realize it

industryprofile

DETAILS can take years of experience to be successful. “We want to give anyone entering the industry the proper tools for success.” CMBA-Ontario is working on expanding its education library with new courses for 2022, both online and in person. Keller also sees more women being recognized as mortgage professionals in the last few years. She said there can be some challenges in a typically male-dominated industry, but women tend to work together and support one another. “They lean on each other for help.” Keller herself was recently recognized as one of the industry’s 2021 Women of Influence by Canadian Mortgage Professional magazine. The magazine celebrated 82 of the industry’s “trailblazers and changemakers.” When she heard about the nomination, Keller said she was surprised and shocked. “I thought it was a joke, really, and I was at a loss for words! It’s nice to be acknowledged for my efforts with all of the hard work I put in over the years. “Event planning is a stressful job, but it does have many rewards. It’s all in the fine details. No one ever sees the mistakes or issues that happen even minutes before. When guests arrive, see a picture-perfect event and are enjoying themselves, that’s what counts.” Keller started her mortgage industry career “from the ground up” and has learned a lot while progressing through the ranks.

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“I learn by listening, taking notes and taking constructive criticism. I ask for direction when needed, rather than guessing.” She has also learned to “be patient and don’t take no for an answer.” If there is an issue or concern, Keller believes “there is always a work-around.” Her role as executive director hasn’t changed much. She still gets to network with great lenders, brokers and service providers. “I truly believe that working in the service industry gave me the personability to connect with people on all levels.” Keller’s sociability also extends to animals. She and her husband, Jason, and nine-year-old daughter, Elle, are strong supporters of animal well-being. When she isn’t organizing events and supporting CMBA-Ontario, she and her family are helping animals. In the past, they have volunteered for Adopt a Dog/Save a Life, a Toronto-based organization that places dogs with foster families.

“At one time, our family fostered seven cocker spaniels all at once,” said Keller. “We also collect blankets for the Caledon animal shelter.” The Keller residence is a full house with Petra, Jason and Elle, their rescue cat, Kitty, and two teacup yorkies, C.C. and Porkchop. “We have our hands full for sure!” Keller also has a passion for food. Going back to her restaurant roots, she enjoys cooking for friends and family in her spare time. Her favourite recipes include Italian, German and various Asian cuisines. The same love for hospitality and commitment to personal growth that she has cultivated throughout her life is reflected in Keller’s goals for the next five years at CMBA-Ontario. Aside from growing the membership, “I would like to bring more events and empower everyone entering the industry with a high level of education and competency,” she concluded. CMB MAGAZINE

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LIBERAL GOVERNMENT HOUSING PLAN – A HOME FOR EVERYONE A Solid Foundation or a House of Cards? BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC

BACKGROUND House prices continue to rise sharply, and housing supply remains very short. Housing affordability was a hot topic in the recent federal election, and the Liberal Party promised to move forward with a comprehensive housing plan to unlock home ownership, build more homes and protect your rights. Indeed, the plan is titled A Home. For Everyone. Yes, politicians often overpromise or blur aspirations and goals with promises. Yes, the Liberals on

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September 20, 2021, were elected as a minority government and so cannot dictate matters on their own. And yes, it is far too early in the mandate to fully assess whether election promises have been kept. However, it is not too early to assemble a catalogue of the promises and to determine what progress has been made thus far in the minority government circumstances. This can inform mortgage brokers as to government’s policy directions that might impact their business.

housingplan

The following is a summary of the Liberal’s 16-point housing plan; the plan is set out more fully at liberal.ca/housing/. An assessment of the progress in implementing the plan follows. THE PLAN Category 1: Unlock Home Ownership Point 1: New Rent-To-Own Program The purpose of this program is to make it easier for renters to get on the path towards home ownership while renting. One billion dollars in loans and grants would be available to develop and scale up rent-to-own projects. The landlord would commit to charging a renter a lower-thanmarket rate and to transferring ownership of residential units within five years. The renter would commit to renting a property for a period of time with the option of buying it at a locked-in price before the end of the lease. New developments enrolled in the plan would set aside a portion of new housing for rent-to-own purposes. Current renters and landlords, particularly those in condominium settings, would have access to enter into a rent-to-own agreement. Comment: There is no indication of how much of the $1 billion would be for loans and how much for grants.

Point 2: New Tax-Free First Home Savings Account The purpose of this program is to help Canadians under 40 years old afford a down payment faster. Canadians under 40 years old would be allowed to save up to $40,000 in a First Home Savings Account (FHSA). Like a Registered Retirement Savings Plan (RRSP), any deposits to the FHSA would be deductions from taxable income, and like a Tax-Free Savings Account (TFSA), the savings would be permitted to compound and grow taxfree. If the funds were not used for a home

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purchase by the age of 40, they would convert to normal RRSP savings. Comment: Presently, the Home Buyers’ Plan allows Canadians to borrow up to $35,000, tax-free, from their RRSPs to use in purchasing their first home. The funds must be repaid with 15 years. This is available to each member of a couple; the loan in such a case would be a total of $70,000.

Point 3: More Flexible First-Time Home Buyer Incentive The 2019 First-Time Home Buyer Incentive (FTHBI) gave home buyers access to government funds in exchange for a second mortgage. There is no requirement to pay back the loan until the earlier of 25 years or the person selling their home, at which time the government receives a proportionate share of any increase or decrease in the value of the home. The FTHBI would be changed to allow participants to choose between the current shared-equity approach or the second mortgage instead being a loan repayable only at the time of sale. Under the latter option, borrowers would not have to pay a monthly instalment but would instead have payments deferred (at a market interest rate) until the time of sale. Comment: The First-Time Home Buyer Incentive offers loans of 5% or 10% where the household income is less than $120,000 ($150,000 in some cities). The total borrowing permitted is no more than four times the qualifying income (4.5 times in some cities).

Point 4: Increased First-Time Home Buyers’ Tax Credit The First-Time Home Buyers’ Tax Credit would be increased from $5,000 to $10,000. Comment: The existing credit is $5,000. The existing credit results in a one-time tax saving of $750, the increased credit amount would increase the one-time tax savings to $1,500. The credit can be split with a spouse or common-law partner with whom you share the home purchase, or fully claimed by either.

Point 5: Reduced CMHC Premium The premium charged by the Canada Mortgage and Housing Corporation (CMHC) on mortgage insurance for new buyers would be reduced by 25%. As well, the insured mortgage cut-off amount would be increased from $1 million to $1.25 million and would be indexed to inflation.

Category 2: Build More Homes Point 6: New Fund to Support Municipal Processes Four billion dollars would be invested in a Housing Accelerator Fund (HAF) to support municipalities that grew housing supply faster than their historical average, reduced approval times, helped establish inclusionary zoning bylaws and encouraged transitoriented development. Cities and communities that met the criteria would be eligible to be paid from this fund. Also, funds would be invested in furthering e-permitting technology and helping communities streamline the planning CMB MAGAZINE

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process. As well, the federal government would work with municipalities to identify vacant or underused property that should be converted to housing.

Point 7: Increased National Housing Co-Investment Funding National Housing Co-Investment Funding (NHCF) would be increased by a total of $2.7 billion over 4 years. These funds would be dedicated to helping affordable housing providers acquire land and buildings to build and preserve more units, extending the model of co-operative housing to new communities, accelerating critical repairs so that housing supply remains affordable and is not lost, and developing projects for vulnerable groups (such as women, youth and persons with disabilities).

Point 8: Increased Budget for Converting Empty Office Space into Housing The Budget 2021 commitment would be increased to $600 million to support the conversion of empty office and retail space into market-based housing. This would include empty space in federal buildings and in commercial buildings. The federal government would work with municipalities to create a fast-track system for permits to allow faster conversion of existing buildings.

Point 9: New Multigenerational Home Renovation Tax Credit Families wishing to add a secondary unit to their home for the purposes of allowing an immediate or extended family member to live with them would be eligible for a Multigenerational Home Renovation Tax Credit (MHRTC). It would allow them to claim a 15% tax credit up to $50,000 in renovation and construction costs.

Point 10: Develop an Urban, Rural and Northern Indigenous Housing Strategy The strategy would be supported with dedicated investments. The federal govern32

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ment would work with Indigenous partners to co-develop an urban, rural and northern Indigenous housing strategy to ensure more Indigenous people have access to safe and affordable housing. It would also work with Indigenous partners to create a National Indigenous Housing Centre, which would lead to Indigenous people overseeing federal Indigenous housing programs.

Point 11: Proceed with Funding to Work Toward Ending Chronic Homelessness As outlined in Budget 2021, the government would move forward with a $567 million investment, in addition to $2.2 billion previously committed, to support communities across the country.

Category 3: Protect Your Rights Point 12: New Home Buyers’ Bill of Rights and Protection for Tenants The Bill would include: n Banning blind bidding. (Blind bidding is when home buyers submit offers to sellers and sellers do not disclose the details of competing bids. It is how most residential properties are sold in Canada.) n Establishing a legal right to a home inspection. (It is often impossible, as a practical matter in a hot market, to make an offer conditional to a satisfactory home inspection. Whether a person finds it worthwhile to exercise the right to obtain a home inspection is of course a separate matter.) n Ensuring total transparency on the history of recent house sale prices on title searches. n Requiring real estate agents to disclose to all participants in a transaction when they are involved in both sides of a potential sale. n Moving forward with a publicly accessible beneficial ownership registry (British Columbia has one in place already). n Ensuring banks and lenders offer mortgage deferrals for up to six months in the event of job loss or other major life event. n Requiring mortgage lenders to act in your best interest so that you are

fully informed of the full range of choices at your disposal, including the FTHBI. (The devil is definitely in the details. A neutral adviser, such as a mortgage broker, might already have this duty, but it is hard to see how this would be imposed on a party on the other side of a transaction with a competing interest.) Federal and provincial regulators will be convened to develop a national action plan to increase consumer protection and transparency in real estate transactions. Tenants would be offered some protection by a different approach. Landlords would be required to disclose on their tax filing the rent they received pre- and post-renovation. A proportional surtax would be charged if an increase in rent after a renovation is excessive. This would stop “renovictions” by deterring unfair rent increases.

Point 13: Extension of Curbing Foreign Ownership Foreign money would be banned from purchasing a non-recreational, residential property in Canada for the next two years, unless this purchase was confirmed to be for future employment or immigration in the next two years. This will also allow for provinces and municipalities to develop a framework to better regulate the role of foreign buyers in the Canadian housing market so that this money does not deter housing from being available for and used by Canadians. As outlined in Budget 2021, starting January 1, 2022, non-resident, non-Canadian owners will be subject to Canada’s first-ever national tax on non-resident, non-Canadian owners of vacant, underused housing. This would be extended to include foreign-owned vacant land within large urban areas.

Point 14: Review to Stop Excessive Profits in the Financialization of Housing A review would be undertaken of the tax treatment of large corporate owners of residential properties such as Real Estate Investment Trusts (REITs). Policies would be put into place to curb excessive profits in this area, while protecting small

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independent landlords, and more broadly, down payment requirements for investment properties will be reviewed.

Following are illustrative comments about the plan; there is no attempt to be exhaustive.

Point 15: New Canada Financial Crimes Agency

Many components of the plan are, according to Canada’s Constitution, matters within exclusive provincial rather than federal jurisdiction. The federal government could certainly encourage the provinces to move on these matters but could not legislate in these areas. The provinces have exclusive jurisdiction to make laws regarding property and civil rights and those regarding municipal institutions. The provincial power over property and civil rights gives provinces the authority to regulate trade and commerce within their respective territory, including regulating the operation of particular industries, businesses or professions within provinces. The federal government would need the co-operation of the provinces to pursue many of the stated goals including a rent-toown program (Point 1); changes to zoning, building permit and building approval processes (Points 9 and 12); and regulatory requirements of lenders and non-federally controlled financial institutions (Point 12).

Canada Financial Crimes Agency would be a national law enforcement agency dedicated solely to investigating and combatting all forms of major financial crime, including the presence of money laundering in the housing market. The power of federal regulators would be increased to respond appropriately to housing price fluctuations to ensure a more stable Canadian housing market.

Point 16: New Anti-flipping Tax Residential properties would be required to be held for 12 months or be subject to an anti-flipping tax. Changes in life circumstances due to, for example, pregnancy, death, employment, divorce, or disability, would be exempt from this policy. Sellers who were subject to this tax would be able to deduct legitimate investments in refurbishment.

ANALYSING THE PLAN Comments: While the plan contains many points that could be steps in the right direction, it suffers from including matters that: n are according to our Constitution within the exclusive jurisdiction of the provinces; n would be very difficult (to be generous) to implement; n would be ineffective in increasing housing supply to any noteworthy degree; n may assist people to access better homes, but would not assist people to get into homes who otherwise could not do so; n merely restate existing policies; n are stated so generally as to be impossible to assess; and n should really be part of a far more encompassing plan.

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Provincial Jurisdiction

Implementation Issues Some components of the plan have been or would be exceedingly difficult, if at all possible, to implement. For example, Point 7 indicates an increase to funding for the National Housing Co-Investment Funding program. The existing program has been criticized for having an application process that is exceptionally long and requires the applicant to have considerable expertise to complete. Once approved, the funding takes exceedingly long to arrive. As well, the amount of funding is insufficient to have any true impact on making the amount of rent affordable for low-income tenants. There has been little uptake. The effectiveness of the program would not be assisted by increasing its funding if its delivery model is ineffective. While Point 6 provides only skeletal information concerning the federal government providing support to make provincial processes faster, it is easy to visualize this program being bogged down with unwieldy application and verification processes. Either the level of supporting documentation required of the municipalities or the level of trust by the federal government would have to be monumental.

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Questionable Effectiveness It is unlikely the scale of measures provided by the plan would be significant enough to dent the much larger problem of unaffordable housing and insufficient supply. While every bit helps, it is unlikely this plan will be effective to any significant degree. At the micro level, it is doubtful that the amount of investment would result in sufficient changes to savings for individuals so as to make them suddenly go from not being able to purchase a home to being able to purchase one. At the macro level, it is doubtful this amount of investment would result in anything but a very small number of new projects that would otherwise not have been built. The changes provided in Points 2, 4, 7, 8, 13 and 14 are simply not significant enough.

Better Homes, Not More Homes Rather than open access for Canadians who would be unable to purchase a home, the plan more likely would make it possible for Canadians who can already afford a home to qualify to purchase a better one than they could otherwise obtain. For example, a reduced CMHC premium and higher qualifying purchase amount would help a person to qualify for a higher mortgage (Point 5) but would do little to assist a person who could not afford to make a purchase in the first place. As well, giving first-time home buyers the option to treat the first-time home buyer incentive as a loan rather than an equity purchase (Point 3) helps the person retain more of the sale price when they sell the property; it would not have assisted them to get into the property in the first place. In effect, the additional funds would allow the person to have more money for their second rather than first purchase.

Many of the points in the plan are not new; they are restatements or relatively minor modifications to existing programs (Points 3, 4, 5, 7, 8, 11, 13 and 16). Particularly noteworthy is Point 16, where the plan promises a new anti-flipping tax for buyers who do not, unless life circumstances have changed, hold their residential property for at least 12 months. This

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Too Broad to Assess Many of the points in the plan are good intentions and aspirations, but they lack detail to be assessed as a plan (Points 10, 11, 14 and 15).

Cannot Make a Housing Plan in Isolation A comprehensive housing plan cannot be made in isolation of other levels of government and without being part of a package accounting for other societal needs such as land use plans, schools, hospitals and transportation hubs. Increasing the housing supply needs to be balanced with controlling the consumption of resources and done in a way that does not promote urban sprawl. Developers should have incentives to build family housing outside of urban centres. Municipalities need to do their quality-control functions regarding building permits and approvals, but do it in way that is sensitive to the fact that delays on their part increase the costs of development (including financial carrying charges) for developers, which in turn increases the selling price of real estate. As well, consumers’ expectations need to be addressed. It is not reasonable to expect that society will provide affordable housing to the liking and in the location of every person’s preference.

PROGRESS The Throne Speech of November 23, 2021, has set

Not New

is essentially a restatement of the existing tax on capital gains. Capital gains (for example a profit made upon the sale of real estate) already are taxable, the tax is already not applicable to the sale of a principal residence, and the principal residence exemption already does not apply if it is determined the person bought the home for the purpose of reselling it a short time later.

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out the government’s policy direction. It acknowledges that addressing housing is a priority in addressing inflation. It stated that the government is committed to working with partners to get real results, whether by building more units per year, increasing affordable housing or ending chronic homelessness. It specified the following components of the housing plan: the Housing Accelerator Fund to help municipalities build more and better, faster; the more flexible First-Time Home Buyer Incentive; the new Rent-to-Own program; and the reduced closing costs for first-time buyers to help families buy their first home sooner. Parliament needs to pass a budget to fund the promises provided in the Throne Speech. This will likely be in 2022. Only then will the promises be detailed such as to allow for a full assessment.

TAKEAWAYS It appears the federal government will be introducing new programs to provide greater assistance to first-time home buyers and to increase the supply of housing. While every step counts, it is unlikely that the steps will be significant enough to assist first-time home buyers who otherwise could not make a purchase. It will more likely help already qualified first-time home buyers to purchase a better home than they could do so otherwise. The plan suffers from jurisdictional, implementation and effectiveness issues. Some of its points are not new, and others are stated too broadly to be assessed. A housing plan needs to not be made in isolation from other levels of government and society’s other needs. Brokers should nevertheless be knowledgeable as to assistance programs available to clients, and it appears there may be some new ones coming up.

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In mortgages and municipal government, Darnelda Siegers works to achieve understanding and a clear action plan BY LISA GORDON

BROKERING COLLABORATION

hether she’s building a mortgage deal or leading a local council meeting, Darnelda Siegers is used to navigating a sea of constant change. A mortgage broker since 2007 and the mayor of the District of Sechelt, B.C., Siegers wears a few different hats and is certainly well versed in time management. In her role as a mortgage associate with Mortgage Alliance – Enrich Mortgage Group Ltd., Siegers thrives on the fact that no two deals are the same. With a teaching degree and a major in math, she makes it a priority to ensure her mortgage clients are educated about the entire purchasing process. In fact, first-time buyers are her specialty. “I love working with first-time homebuyers,” she said. “I really like working with people who don’t understand how it works. I walk them through it until they are comfortable.” Siegers always takes the time to understand her clients’ goals, and that begins with a frank discussion to find out what they know about the home-buying process and what they are hoping to buy. “I explain what I do and how I support them. We start at the beginning and I walk them through it, all the way to signing at the lawyer’s. If the ratios are a bit tight, I’ll have them send me the listings so we can run the numbers to make sure it will work for them.” Siegers’ mortgage business accounts for about a third of her working hours, with the other two thirds belonging to her mayoral role. To help keep her mortgage deals moving while she’s serving at council, Siegers employs a fully licensed mortgage associate, Jennifer Bell, who handles all of the paperwork and shepherds deals through to conclusion.

In 2009, Siegers and her husband moved from Calgary to Sechelt, located on B.C.’s Sunshine Coast. Two years later, she successfully ran for local council. “I did two terms as a councillor, seven years in total, and then ran for mayor in 2018,” Siegers told Canadian Mortgage Broker. “My job as mayor is to connect people, organizations, non-profits and businesses to facilitate achieving the future we all see for the community – whatever that is.” One of the challenges she encounters

as mayor is collaborating between the four governments on the Sunshine Coast: the District of Sechelt, the Town of Gibsons, the Sechelt Indian Government District and the Sunshine Coast Regional District. This year, in fact, Siegers serves as Mayor of Sechelt and the Chair of the Sunshine Coast Regional District. “Through the role I have in municipal government, I sit on all kinds of committees: the homelessness advisory, housing, seniors’ planning table, Sunshine Coast Community Forest and Sechelt Downtown Business

Right: Darnelda Siegers was 'locked up' for the Jail 'N Bail fundraiser held to support Cops for Cancer. Opposite (top): Siegers wears many different hats between her work as a mortgage broker and being mayor of the District of Sechelt; (below) Attending an event at the local SPCA as part of a fundraiser. Far right: Siegers and her husband Adrian own a sailboat and she enjoys getting out on the water. 38

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Association, to name a few. I am a director of the Partners in Change Society, which is looking to bring nonprofits together to combine their talents,” said Siegers. “In the mortgage world, while you’re always dealing with mortgages, all the parameters change with every deal and the environment changes. In local government, we’re always addressing something new. There is just so much we deal with. It’s huge and we must try to balance the present while having our eye to the future.”

It’s been an eventful year for municipal government on the Sunshine Coast, as Mother Nature delivered the one-two punch of drought in the summer and intense flooding in the fall. Add to that the morphing regulatory environment surrounding Covid-19, and you begin to see why Siegers must be a master of time management. “During the flooding we had a state of local emergency and a boil water advisory in place,” she recounted. “Roads collapsed and were impassable. It took up more of my time. While I’m not actively involved with the day-to-day of emergency response I have to sign all the orders, so I need to be really clear about what’s happening.” With local residents concerned about climate change and issues such as watershed protection, sustainable forestry, stormwater management and rising sea levels, Siegers is always dealing with multiple priorities. “Wherever you stand, you’re never clear what the ground will look like tomorrow where you’re working,” she said. Referring to Covid-19 protocols, she recalled: “One weekend, the province made an announcement about recreation programs. On Saturday morning, it was announced there were certain limitations coming in that required us to shut down our facilities. Then, we were notified our region wasn’t involved – but then it was. That was all in one day! There have been continually changing provincial orders to alter and shift what we’re doing. In that environment, it’s tough. Residents in our communities look to us for direction.” With the next municipal election set for Oct. 15, 2022, Siegers is often asked whether she will run for the mayor’s seat again. “I am getting that question almost daily because of the election coming up,” she said. “I have to say that for the last almost two years now, it’s been really difficult. It’s been a hard slog, not being able to travel and being immersed in it all the time. It’s an opportunity to make a difference in my community, but I do need a break. I have booked some time off and in the spring, I will let them know my plan.” Meanwhile, Siegers is still involved with the Sunshine Coast chapter of 100 Women Who Care, a local group she founded after reading about the parent organization in a newspaper article.

“I thought it was a great way to give back to the community. A group of about 75 women gets together four times a year for an hour, and charities present a five-minute pitch. We choose one and then we each write out a cheque for $100.” Leisure is a scarcity for Siegers, but when she does have free time, she enjoys reading and riding her new electric bike. “The Sunshine Coast is very hilly and the main highway runs along the ocean,” she said. “I rented an e-bike for active transportation week and really enjoyed it, so I thought I’d see what I can do with my own electric bike.” She and her husband, Adrian, own a sailboat and they love to get out on the water. It’s like a mini getaway – but with cell service on the boat, Siegers can always review a council order or check a mortgage deal. “When I have time, I also love to bake and cook. I enjoy trying out new recipes and I give a lot of it away. When the District of Sechelt was really busy dealing with water and stormwater during the flooding, they ordered pizza for our Public Works and Parks teams and I baked them cookies.” Siegers draws a connection between her parallel realities of mortgage brokering and municipal mayor: “In both worlds, we can look at what we have to do today or look at what the future holds and how we get there. The rules keep changing and we continually have to learn and grow to stay on top of the mortgage industry and municipal government. It never gets stale. “I love both worlds.” This interview with Darnelda Siegers 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 researching your family roots, 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

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CAN A BORROWER BE THEIR OWN SECURED LENDER? Making Sense of Disorder

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

BACKGROUND Shelby Broke owned real estate and had three mortgages registered against title. She later purchased the first mortgage and immediately stopped making the monthly payments it required. As well, in her capacity as the borrower, she stopped maintaining property insurance, paying property taxes and paying property maintenance costs. She took care of those costs instead in her capacity as the first mortgage lender and added them, along with the missed payments, to the outstanding mortgage balance. The entire outstanding balance continued to bear interest. Twenty months after buying the first mortgage, Broke filed for bankruptcy. Her trustee in bankruptcy (Trustee), acting in Broke’s shoes as the first mortgage lender, took action to enforce the mortgage. The property sold in those proceedings, but unfortunately the net sale proceeds were not enough to pay out all three mortgages. Who was going to suffer the shortfall? The usual order for paying out registered financial charges (in this case mortgages) follows the idiom ‘first in time, first in line,’ meaning financial charges are to be fully paid in the order they were registered against title. The first mortgage is to be fully paid before the second receives any proceeds, the second mortgage is to be fully paid before the third receives any proceeds, and so on. The owner of the property would receive any proceeds remaining after all of the financial charges had been paid. The Trustee expected this approach to be followed. Under this approach, the first mortgage lender (in effect, the Trustee acting in place of Broke as the lender) would be fully paid out and the second mortgage would be partially paid out. No sale proceeds would be left to apply to the third mortgage lender or to pay to the owner of the property (in effect, the Trustee acting in place of Broke as the property owner/borrower). The second and third mortgage lenders cried foul and wanted the first mortgage to be disqualified from having priority over the second and third mortgages. They argued that a borrower should not be able to be their own secured lender, especially when being so would prejudice other registered lenders. The second and third mortgage lenders wanted the first mortgage 40

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removed from title and for them to be moved into first and second position respectively. They argued that the value of the original first mortgage should become part of the registered owner’s equity in the property, rather than continuing as a separate charge, and be paid only after their mortgages were paid in full. Under this approach, the second and third mortgages would be paid in full and the balance of the net proceeds would be paid to the registered owner (in effect, the Trustee acting in place of Broke as the property owner/borrower). Note that this approach would net far less proceeds for the Trustee than would the approach suggested by the Trustee. Certainly, there is logic to both scenarios. On one hand, the rule for establishing the order of payout has been long established – first in time, first in line. On the other hand, much unfairness or inequity can occur if the established rule can be subverted by the borrower becoming their own lender. The competing approaches present quite the issue. For any reader who thinks this scenario is far-fetched, you are wrong. It is roughly the facts of Crossroads-DMD Mortgage Investment Corporation v MNP Ltd, 2021 ABCA 417 (Crossroads). Do note that the case is decided according to Alberta law, much of which is consistent across the country. However, in addressing such cases in other provinces, the legislation that governs land title registration in the particular province should be consulted.

WHAT HAPPENED IN CROSSROADS? In Crossroads, Companies A, B and C were affiliated in the business of mortgage investing. They had the same shareholders, directors and managing company. Their property holdings and mortgage portfolios included the following. Property 1 was owned together by Companies A and B; the two of them having purchased the property in foreclosure proceedings. Company B had paid out the existing first mortgage and took transfer of it in the name of Companies A and B, rather than having it discharged from title. Later, Companies A and B granted a second mortgage against the property in favour of Company B.

mortgagematters

Property 2 was owned together by Companies B and C. They had refinanced the property and later paid out that mortgage lender. They took transfer of the mortgage rather than having it discharged from title. They granted a second mortgage against the property in favour of Company B. Property 3 was owned solely by Company C. The property had been refinanced with a new first mortgage and a second mortgage being granted in favour of Company B. Later the first mortgage was paid out, and Company C took transfer of it rather than having it discharged from title. The resulting property holdings were as follows. Summary of Ownership and Registered Lenders of the Three Properties PROPERTY 1

PROPERTY 2

PROPERTY 3

OWNER

Companies A and B

Companies B and C

Company C

1st REGISTERED LENDER

Companies A and B

Companies B and C

Company C

2nd REGISTERED LENDER

Company B

Ultimately, Company A went into bankruptcy, Company C went into receivership, and Company B remained solvent. The trustee in bankruptcy for Company A and the receiver for Company C were the same company. The three properties were sold, and a dispute arose as to the proper distribution of the net sale proceeds.

THE ISSUE On one side of the issue was the bankruptcy trustee and the receiver as first mortgage lenders, on the other was Company B as the second mortgage lender. The trustee in bankruptcy and receiver/manager argued that the first mortgages were transferred and, as usual, should be fully paid out before the second mortgage receives any of the sale proceeds.

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Company B argued that because the first mortgage lender and the registered owner were the same entities, the two interests merged. In other words, the first mortgage ceased to exist and the owner’s equity in the property was increased accordingly; consequently, Company B’s mortgages were first mortgages and were therefore entitled to be paid first. Simply put, the court had to decide whether the first mortgages, on being paid out, had merged with the ownership interest, or continued to exist separately such and had priority over the second mortgages.

THE DECISION In deciding the case, the court considered the general rule established by the common law (that is, court precedents), an exception to the general rule, and an exception to the exception to the general rule.

Common Law The court started with the common law presumption that when the same person owns real estate and a mortgage registered against the real estate, the two interests merge. The ownership interest continues but the mortgage lender interest ceases to exist, with the owner’s equity being increased by the amount of the discontinued mortgage. This is based on the principle that a person cannot owe a debt to themself.

Equity’s Intention-Based Exception to the Presumption of Merger Courts have recognized that applying the common law strictly sometimes resulted in undue hardship or unfairness. Courts in such cases may apply a different set of rules and principles aimed at achieving fairness. This different set of rules and principles is referred to as equity. Equity created an exception to the common law merger rule. Equity allows the two interests to continue as separate interests, if there is enough evidence to show that the owner intended them to do so. To decide whether the owner had the necessary intention, the court will look at all of the circumstances, including: CMB MAGAZINE

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mortgagematters

n whether the intention was expressed; n whether the owner’s actions were consis-

tent with the intention; and n whether it appeared advantageous to the owner that the charge remain separate. The onus to prove the intention to keep the interests separate and alive is on the party who opposes merger.

Example 1 Courts have applied this exception where the mortgage secured a debt owed by someone other than the landowner, such that there was a reason to keep the mortgage alive. For example, the court applied the exception where a person purchased real estate from a trustee in bankruptcy and later purchased the first mortgage from the lender. Later still, the first mortgage was transferred to a third party. The court in that case said there was no merger because the buyer had not assumed the debt under the first mortgage, the land was still security for the first mortgage debt, the mortgage document indicated the intention to keep the mortgage

interest alive, and the buyer had been trying to find someone else to take on the first mortgage to avoid having to pay it out.

title; and the original owner had expressly agreed to repay her the amount she had paid on the first mortgage.

Example 2

Equity’s Exception to the Intention-Based Exception

The exception has also been applied where a person purchased a high-priority mortgage and ownership of the real estate but was not a debtor on any subsequent charges. For example, a property owner with three mortgages registered against title was being foreclosed on by the first mortgage lender. Under agreement with the registered owner, the third mortgage lender paid out the first mortgage and took transfer of it. She also took transfer of the property from the registered owner. The original registered owner agreed to repay the third mortgage lender for the amount paid to the first mortgage lender. The court in that case said there was no merger because the third mortgage lender had shown throughout that merger was not intended. She had the mortgage assigned rather than discharged; she asked for the mortgage to remain on

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Application to the Facts Each of the first mortgages was paid out in full. In each case, the mortgagors requested a transfer of the mortgage to themselves, rather than a discharge. No explanation was offered to the court as to why in any of the instances the first mortgage was transferred to the owner(s) rather than being discharged from title. The court concluded that the first mortgages merged into the ownership interest, and later mortgages moved up in priority. In effect, the first mortgages were removed from the title and the second mortgages became first mortgages.

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To avoid the exception itself causing undue hardship and unfairness, equity has created an exception to the exception. An owner cannot take transfer of a mortgage under which he is liable and maintain it against other lenders to whom he is also liable. However, if the owner is not liable under either the transferred mortgage or the other mortgages, the transferred mortgage can be kept alive. For example, an owner who has three mortgages registered against title cannot purchase the first mortgage and then assert priority over the second and third mortgage.

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Generally, if an owner pays out a mortgage registered against his title, the two interests are merged and the amount of the owner’s equity in the property increases accordingly. In some circumstances, an owner of real estate may be able to payout a mortgage and take transfer of it rather than have it discharged. This involves determining the intention of the person at the time they took transfer. Generally, an owner will not be permitted to take transfer of a mortgage and then set it up against lower priority mortgages. He is not blocked from doing this if he was not liable under either the mortgage of which he took transfer or the lower-priority mortgage. Before proceeding with any of these possibilities, legal advice should be obtained.

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legalease

LIMITATIONS ACT: TIME – NOT MERIT – MATTERS (LAWSUIT DELAYED IS LAWSUIT DENIED) BY RAY BASI, J.D., LL.B., DIRECTOR OF EDUCATION FOR CMBA-BC AND MBIBC

enders want to enforce their mortgages. Borrowers want to avoid enforcement actions. Brokers want to enforce claims for their fees and avoid claims from clients for inadequate advice. Putting aside whether a particular claim has merit, the claim can be defeated if it is not brought in time. This begs the questions of how long do claimants have to bring such court claims and when does the clock start ticking? The Ontario Court of Appeal provides guidance in Dass v. Kay, 2021 ONCA 565. While the case involves Ontario legislation, the limitations legislation of other provinces involves similar considerations; nevertheless, your province’s legislation should be consulted in specific instances.

WHAT HAPPENED? In early 2015, the principal of a mortgage brokerage was arranging commercial purchase financing for a client. The mortgage loan application submitted by the broker to a potential lender included the company’s financial statements, that the client’s brother and the brother’s company would be guarantors, and that the company would be a tenant at the property. The loan application was declined. The application was dishonest in that neither the brother nor the brother’s company had agreed to the indicated guarantor or tenancy arrangements, or to the financial information being used. The innocent brother knew nothing of the application until July 24, 2015, when he used the same broker to pursue commercial purchase financing for a different property. His application regarding that property was also declined. Although he was concerned the dishonest application had interfered with the review of his loan application, the broker told him his application was declined because the lender no longer lent on his type of business. Nevertheless, on August 21, 2015, the innocent brother sent an email to his lawyer, the brokerage and others claiming that the failure of his loan application was due to the improper action of the broker and the wrongdoing brother, damaging his reputation in the eyes of the lender. The innocent brother said that he could lose millions of dollars. Around this time, the innocent brother was trying to arrange refinancing for another property with an affiliate of the lender who had declined 44

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CMB MAGAZINE

legalease the earlier loan. The affiliate denied the refinancing loan application and as well denied the commercial purchase financing, which had already been denied by its affiliate. Eventually, the innocent brother secured loans with other lenders, but at higher rates. In January 2018, the innocent brother sought refinancing from the two affiliate lenders. The representatives of each affiliate explained he had been blacklisted due to the application submitted in early 2015. On April 27, 2018, the innocent brother and his company sued the broker and brokerage for damages to their reputation and commercial harm suffered. They argued that the unauthorized loan application damaged the reputation of the innocent brother and caused him and his company financial loss. The defence applied to the Court to dismiss the lawsuit because it was brought after the two years allowed by the Ontario Limitations Act.

loss or damage, a proceeding would be an appropriate means to seek to remedy it. Unless it is proved otherwise, a person is presumed to satisfy the four bulleted points above from the time the wrongful act or omission occurs.

THE DECISION The fourth bullet is central in deciding this case. When does a person know that a court proceeding would be an appropriate means to seek a remedy? Past cases provide three principles: n It depends on the circumstances of each case (this is accurate but hardly helpful). n The date can be delayed where: • the defendant has superior knowledge and expertise, particularly where the defendant has taken steps to address the plaintiff ’s loss (consider the possibility of this applying to a client-mortgage broker relationship);

to delay start the two-year limit existed. The Court concluded that the innocent brother had not shown that there was such an appropriate situation. He knew in July 2015 that his reputation had been damaged by the actions of his brother and the brokerage and that a proceeding was an appropriate means of seeking a remedy. By August 21, 2015, he knew enough material facts to make a claim; these facts were largely set out in the letter to his lawyer, the brokerage and others. The direct consequence of the loss of reputation was having to pay the higher interest rates. By August 2015, the brother knew of the damage that had occurred (that is the injuries), even if not the damages (the amount of compensation needed). The limitation period starts when the claimant knows of the damage and is not delayed until the claimant knows the amount of the damages. The limitation period is not delayed where a claimant knows there is a claim but wants to

THE ISSUE The issue became, when did the two-year limit to bring the lawsuit start to run? If it began on August 21, 2015, by which time the innocent brother knew of the improper action of the broker and the wrongful conduct of his brother, the innocent brother was out of time. If it began in January 2018, when the representatives of the two affiliated lenders told the innocent brother of being blackballed, the claim was brought in time. So, when did time start to run?

THE LAW The Ontario Limitations Act allows two years within which to bring the action. The Act starts the two-year limit on “the day on which the claim was discovered.” It also provides that a claim is discovered on the earlier of when: n the person first knew they had a claim; and n a reasonable person, with the abilities and in the circumstances of the person, first ought to know they had a claim. A person knows they have a claim when they know: n injury, loss or damage has occurred; n the injury, loss or damage was caused by or contributed to by an act or omission; n the act or omission was that of the person against whom the claim is made; and n having regard to the nature of the injury,

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Do not delay bringing your case while you are looking for evidence. Once you have the right to bring a case, the limitation clock is ticking.

• where an alternative dispute resolution process provides an adequate remedy and has not been completed; • another situation where a claimant could not have known that an action would be an appropriate means to remedy the injury, loss, or damage (not very helpful as it essentially restates the requirement of the Act). n “Appropriate” means legally appropriate, not whether it is appropriate from a strategic point of view or an assessment as to whether the lawsuit would succeed. Neither of the first two ways of delaying the start date apply here. The innocent brother knew the wrong had occurred and no alternate dispute resolution process was occurring. To delay the starting of the limitation period, the innocent brother had to come within the third bulleted point by proving that another appropriate situation

collect more evidence to assess whether the claim is worth pursuing. The Court concluded the limitation period expired and dismissed the case. The innocent brother was ordered to pay the other parties $18,000 in appeal costs, and presumably was also required to pay them costs of the decision that was appealed. All of this not because the innocent brother’s case necessarily lacked merit, but because it was not brought in time.

TAKEAWAYS Bring your lawsuit within the time period permitted or have it dismissed without regard to its merits. Do not delay bringing your case while you are looking for evidence. Once you have the right to bring a case, the limitation clock is ticking. CMB MAGAZINE

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