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Ontario revokes mortgage broker BDMC license over risky investments

Regulator FSCO said BDMC, the lead broker for Fortress projects ... BDMC said it had raised C$920 million for real estate projects from over 14,000 investors. The firm has agreed that existing syndicated mortgage investments in Fortress projects will ...

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Reuters) - Ontario’s financial regulator said on Friday it has revoked the license of mortgage brokerage Building Development and Mortgages Canada Inc (BDMC) and Vince Petrozza, a co-founder of a related firm, Fortress Real Developments, following an investigation into risky syndicated mortgage investments

Vince Petrozza, chief operating officer (COO) of Fortress Real Developments, leaves the company offices in Richmond Hill, Ontario, Canada November 21, 2017

REUTERS/Chris HelgrenRegulator FSCO said BDMC, the lead broker for Fortress projects, and three mortgage brokers, FDS Broker Services Inc, FFM Capital Inc and FMP Mortgage Investments Inc, which marketed Fortress products as their primary or sole line of business, were fined a total of C$1.1 million

(Special Report: Canada regulator ignored warnings on risky mortgage investments - BDMC confirmed that it had agreed a settlement with the Financial Services Commission of Ontario (FSCO) and would stop all mortgage brokerage activities

BDMC said it had raised C$920 million for real estate projects from over 14,000 investors

The firm has agreed that existing syndicated mortgage investments in Fortress projects will be managed by a so-called arms length administrator, FAAN Mortgage Administrators, which will conduct business in BDMC’s name

In a special report published in November, Reuters revealed that the Canadian province’s regulator had been investigating brokers raising funds for projects associated with Fortress since 2011 but had failed to take action despite repeated warnings that the marketing of the risky investments broke provincial laws

Syndicated mortgage investments, which pool the funds of private lenders to raise funds for real estate development, have grown in popularity in Canada as investors looked for ways to generate better returns from their savings with bank savings accounts offering record low interest rates

However, their growth in popularity led to thousands of pensioners and mom-and-pop type investors putting their life savings at risk

An investor outcry about the products has focused public and government attention on FSCO’s lax regulation of the market

In the past decade, more than 20,000 retail investors have put as much as C$1.5 billion (US$1.2 billion) into syndicated mortgages, mostly in Ontario, according to regulatory sources

Roughly 90 percent of those investments, the sources said, have ended in a loss or are at risk of doing so, and Fortress projects make up more than half of the investments

The regulator said on Friday it had revoked the broker licenses of Petrozza and three other people, requiring them to stop all mortgage brokering businesses immediately

Ildina Galati-Ferrante, principal broker of BDMC, surrendered her broker license and was required to cease all mortgage brokering activities

Reporting by Matt Scuffham; Editing by Jeffrey Benkoe and Grant McCoolOur Standards:The Thomson Reuters Trust Principles.0 : 0narrow-browser-and-phonemedium-browser-and-portrait-tabletlandscape-tabletmedium-wide-browserwide-browser-and-largermedium-browser-and-landscape-tabletmedium-wide-browser-and-largerabove-phoneportrait-tablet-and-aboveabove-portrait-tabletlandscape-tablet-and-abovelandscape-tablet-and-medium-wide-browserportrait-tablet-and-belowlandscape-tablet-and-belowAppsNewslettersAdvertise with UsAdvertising GuidelinesCookiesTerms of UsePrivacyAll quotes delayed a minimum of 15 minutes

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