Fundamental Interconnectedness & Dangers To Housing

April 27th, 2017 · 3 Comments · Buying or Selling Your Property, Landlord Advocacy, Rental Property

Today is not a good day for real estate in spite of many people thinking it is just an ordinary day. That’s because a lot of people cannot connect or know about all the different parts and how they work together. A lot of our system depends on every part playing nice to each other and when they don’t, well, consequences could be very bad. Some of these news items just point to a greater and more serious problem but the reactions to these systemic problems may escalate the initial problems.

Supply Problems With Condos & Housing

This is one of the biggest frauds in the history of investment. That is syndicated mortgages. This is a complex scam that’s beyond most people and that’s how it’s engineered. The small investor doesn’t know he’s been scammed until the money is gone. Multiple corporate entities are used to obfuscate this simple fact until the investor money is long gone, everyone goes bankrupt. This current fraud is sold through the mortgage broker channel and so the brokers are often convincing people to invest money they borrowed from a HELOC.

This is actually pretty much the  same scam as League because they offer guarantees and safety in Canadian Real Estate and their loans are only for A+++ developers. Brand Names in fact. They offer appraisals and letter of opinion from actual appraisers. It looks very legit, but it’s paper thin, property searches on these sites reveal that mortgages are not secure and can’t be secure. For example: Lake East (Oakville) purchased for $1,860,000 on 2015/05/28. Two mortgages are placed on the same day 2015/05/28. One is for $2,696,250 and the other is for $3,000,000. It’s hard to believe the site went from $1.8 million to $5.6 million in value in one day. This is Fortress and Centro’s idea of a “secured” loan for a guy who used a HELOC to make a great investment through his friend the mortgage broker. (Affinity Fraud)

Here’s a Fortress & Core partnership that went bust but the word on the street is that Fortress is finished because of another project they went bust on in Barrie and they lend to all these friendly local developers. Fun fact: you should see the terms of their loans to developers.

These Fortress guys make payday loan companies look like the good guys but why are people lending from them? The point is that money is scarce and without it buildings don’t get built. That stage from land to plan to sold is very delicate and a lot of developers have looked into their pockets and found some IOU’s and some pocket lint, but not enough to fund the buildings. So they “partner” with Fortress because they have no options or they are terrible at math.

Now Fortress sources its capital through mortgage brokers, Centro now defunct and it’s children BDMC and FFM Capital Inc. I can assure you that they do say this is totally guaranteed return. I met personally with a representative and they say this is safe and secure and even probably cures cancer and the common cold. Of course, even though it is very illegal to promote other investments that way, you can say whatever you like about real estate. Real Estate is better than movie theater pop corn with butter.

Developers Are Hurting Financially

I dunno the exact date, but financing has tightened up for developers big time and it’s going to get a lot worse. This is why the growth of these risky third party lenders.

First was Urbancorp, then recently On The Go Mimico and now Harmony Village Sheppard but the news cycle hasn’t caught up with that one yet.

We can expect more bankruptcies in my opinion, this is just the tip of the iceberg. Bankruptcies are a sign of of a healthy real estate market.

Buyer Mortgage Fraud

Another iceberg, in the wheeling dealing world of mortgages, there is the normal and the Brampton way.  This is just the end result of paying people by commission and then expecting them to police themselves.  There’s always a guy who can, for an extra fee “fix” things.  It’s no coincidence that FSCO the mortgage services regulator, who is driving drunk and naked, is policing this and the syndicated mortgages. What the F is going through these people’s minds? Dandelions and Butterflies I suppose. They need to do their job, but first they need to build a time machine and go back to like 5 years ago cause the horse left the barn and the barn is on FIRE.

Today the mortgage fraud story is Home Capital Group is falling down a cliff and I’d say it’s a first of many cliff sliders. It all started with 45 mortgage brokers that were fired for falsifying information on mortgages. Don’t worry guys they all found jobs elsewhere and FSCO was looking at one of those funny puppy videos while it happened. That’s ok because puppies are fun and mortgage fraud investigations suck. Wynne-Wynne is what I always say.

Unfortunately, Home Capital Group and the other guys that lend to self employed people and bad credit people, are not going to be doing that for much longer, this is a large and growing segment of the population that may find it extremely difficult to qualify for a mortgage.

Foreign Buyer Demand

Well let’s just say 15% foreign buy tax, 13% HST and MLTT (land Transfer Tax) 25% tax on income with no carry over of expenses from year to year, and 25% capital gains tax. This is about as fun as using a wire brush to exfoliate.  Never mind just send all your chinese pesos or mexican rupees or japanese krona directly the office of Chris Ballard Minister of Housing and Poverty Reduction Strategy.

Developers Need To Sell 80% Of Units

Before a developer can sell a condo, they need to sell a whole lot of units, and there happen to be more developers going bankrupt, and foreigners aren’t going to buy and lenders are retracting in response to mortgage fraud so it looks like this might be a problem from the supply side, when developers even get to this stage. Financing the developments until they get from land to planning, to city, to OMB, to all the sales, to get construction financing just got a lot more difficult because of the mortgage syndication fraud/class actions/failures.

Domestic Demand

Landlords just got kicked in the nuts with a steel toe boot with the rent control exemption being wiped out. Nuff said.

Build Rental Stock Instead of Condos

Landlords just got kicked in the nuts with a steel toe boot with the rent control exemption being wiped out. Nuff said.


  • Problems with fraud with Mortgages
  • Problems with fraud with Mortgage Syndication
  • Problems with fraud at Home Capital Group
  • Problems with building financing
  • Problems with developers going bust
  • Problems with first time buyer confidence
  • Problems with foreign buyer demand
  • Problems with landlord demand
  • Problems with lending tightening< this is what killed the USA market FYI.

The path to the supply just got really complicated. The path for demand and presales just got really complicated. The path to the mortgage just got a lot harder.

Don’t worry it should be just fine. Real estate in Canada is bulletproof. Nothing to look at.

Hope I’m just being grim again.


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3 Comments so far ↓

  • Victor Fong


    Adding to your already excellent points:

    1. Trump is threatening to pull out of NAFTA. If he actually goes through with it (or starts some type of trade war with us), this would be a huge blow to Ontario’s economy (especially southwestern Ontario). Since the GTA’s economy is so dependent on the building industry, the timing of the Fair Housing Plan couldn’t come at a worse time;

    2. Chinese money coming into Toronto (via actual foreign investors, or more likely, through Canadian permanent residents, students and citizens of Chinese background & who have access to money from mainland China) could dry up if there is a financial crisis in the mainland or if the Chinese government is successful in its efforts to stem the outflow of capital from China. Both scenarios are becoming more likely.

    Love your blog btw…



    • Rachelle

      Thanks Victor,
      I even thought of another compounding problem. If HCG goes bust and it looks like they will, and the mortgage market tightens in response and this is a real possibility. You’re looking at a fair number of forced sales because their clients are there because they can’t go through regular channels and there will be no renewals even for mortgages in good standing.

  • Marko

    Thank you for this post. Very informative. I have heard about the syndicated mortgages in my circle but thankfully avoided investing in those. At the time I felt like I was missing out but sometimes that becomes a blessing in disguise.