Have you heard the stories in the news recently about mortgage fraud? Many of the situations involved an unregulated mortgage, so it’s left a lot of people wondering what that actually means. To understand unregulated mortgages first let’s discuss regulated mortgages.
Regulated means to be governed by an external organization. This means accountability through audits and full disclosure of all information. Basically it means there are rules to follow and your mortgage is legit. You’re protected by the governing body.
There a few types of regulated mortgages available through these organizations:
- Mortgage Investment Incorporations (MIC) – This group is governed by the securities commissions and have strict guidelines to follow. MIC is on the property title.
- Syndicated Mortgages – Two or more investors pool their money and invest in one property. These lenders are named on the title. These lenders are also governed by the securities commissions and heavily regulated and must have a syndicated license.
- Monoline Lenders – Investors that solely deal with mortgages. Their governing body is Office of the Superintendent of Financial Institutions (OSFI). Just like a bank but only deal with properties.
Where do Mortgage Brokers come into play
Think of a Toronto mortgage broker as your representative. They take your information, assess which type mortgage and lender would best suit your needs. They are also heavily regulated and must act in your best interest. In other words it’s their job to find you the best deal possible.
Everything that falls outside of the above situations is probably an unregulated mortgage. Or unregulated mortgage is when a private lender, lends their own money to invest in a property. There is no regulating body on this type of mortgage, so it can be risky.
Should your mortgage broker find a private lender for you, they are required to disclose this information to you and recommend you seek outside legal advice. This is governed by the real estate board in each province.
It’s a good idea to discuss with a mortgage broker the details of your lender. Contact me today for more information about unregulated mortgages.
