Ontario weighs opening private mortgage lenders registry

TORONTO Ontario is considering a registry for private mortgage lenders that could shed light on a corner of the market that has been gaining traction in the wake of federally mandated stress tests for uninsured loans.

A report by Ontario’s Ministry of Finance recommended “incentivizing registration for private lenders,” as borrowers increasingly turn to private sources of funding, such as mortgage investment corporations or other individuals.

“Because these lenders are unregulated, governments have no clear line of sight on their activities and may not know the extent of their market participation,” said the report, part of a review of the province’s Mortgage Brokerages, Lenders and Administrators Act (MBLAA).

“This has resulted in a lack of understanding of the level of financial risk in the private lending sector.”

Noting work done in B.C. that found private real-estate lending could be susceptible to money laundering, the report says the Ontario government and the Financial Services Regulatory Authority of Ontario ought to gain “additional insight” into the sector to help combat fraud.

“During the review, many stakeholders noted that private/ unregulated lending should not be restricted, but could be better understood or quantified,” the report said.

“As such, it is our recommendation that the Ministry of Finance work with FSRA to create a registration regime for private/unregulated lenders that meet certain monetary or activity thresholds.”

There could voluntary registration as well for those not meeting the thresholds, it added, and those who register and lend to “sophisticated entities” could do so without the need for licensing under the MBLAA, the report said.

The Ontario government is eyeing 2020 for any registry, according to Stan Cho, the parliamentary assistant to the province’s minister of finance and co-leader of the review.