Tag Archives: personal information
Ottawa probes mortgage brokerages
Borrowers’ personal data at risk of misuse, privacy chief says
By Tara Perkins – Globe and Mail
The federal privacy commissioner is auditing a number of mortgage brokerages because of concerns about the security of borrowers’ personal financial information, The Globe and Mail has learned.
The audit, which industry sources say began this month, is looking into the potential misuse of consumers’ information to carry out fraud such as identity theft. It’s an issue that carries added significance in the wake of the U.S. subprime mortgage crisis, because mortgage brokers and lenders are now being pushed to request even more information and documentation from borrowers.
“The reason that we are doing this is we have been concerned that personal financial information of Canadians might have been falling into the wrong hands,” said Anne-Marie Hayden, a spokeswoman for the privacy commissioner’s office. “There have been numerous breaches reported to our office over the course of the last year or so.”
Ms. Hayden stressed that the audit is still in the preliminary stages, and it is too early to say what practices within the industry it might uncover.
While slightly more than half of all mortgages in Canada are sold by staff of the big banks, the broker channel, made up of about 16,000 brokers, is responsible for about 30% of mortgage activity, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP).
In the year up to March, total mortgaging activity in the country (including renewals) was about $235-billion.
Borrowers turn over a large amount of information about themselves in order to make what, in nearly all cases, is the biggest purchase of their lives.
Independent mortgage professionals are subject to provincial laws, and the standards governing the industry vary across the country. British Columbia and Alberta, for instance, each require mortgage brokers to have a certain level of training. Ontario tightened its standards for education and licensing with legislation that took effect last year. Manitoba Finance Minister Greg Selinger introduced legislation in April that requires mortgage brokers to be licensed.
Jim Murphy, president and chief executive officer of CAAMP, said most brokerage firms have policies and procedures in place to deal with the safeguarding of borrowers’ data and fraud avoidance. The privacy laws are so strict that there have been instances where brokers have had trouble sharing information with police, he said.
But many in the industry say that government and regulators need to do more to ensure that brokers are above board.
“There is tremendous fraud going on in the broker industry,” said Alex Haditaghi, chief executive of Mortgagebrokers.com, a Toronto-area mortgage broker. The privacy commissioner’s probe is “much needed,” he added.
Mr. Haditaghi said his firm carries out credit checks and criminal record checks on brokers before they join the company, and has put a privacy policy in place.
The Financial Services Commission of Ontario, which is responsible for the oversight of mortgage brokers in that province, recently issued a warning to the industry that it has “received a number of complaints from mortgage brokerages regarding fraudulent activities by their mortgage agents, who were fraudulently accessing clients’ credit information without proper authorization.
“The mortgage brokering industry’s reliance on personal information to complete mortgage transactions makes it a target for individuals who wish to gain access to personal information for the purpose of engaging in criminal activities.” Brokers are required to obtain the borrower’s consent to check their credit history.
An official at one mortgage brokerage said in an interview that a broker signed up with their firm and proceeded to carry out hundreds of credit checks in the span of 24 hours.
The privacy commissioner’s office has received 15 notifications of a privacy breach and in each case the mortgage brokerage came forward voluntarily, Ms. Hayden said. Each of the notifications came from the Greater Toronto Area, and so the commissioner’s office has chosen a sample of a handful of franchises in that area for its audit. Ms. Hayden declined to identify those brokerages.
The law currently does not require brokerages to come forward or volunteer the fact that a breach has occurred, and so the privacy commissioner’s office is struggling to obtain the full picture.
Since Ontario’s new laws governing mortgage brokers took effect last July, the Financial Services Commission of Ontario has conducted at least 68 investigations into the suitability of individuals who have applied for mortgage broker or agent licences, and at least two investigations involving unlicensed mortgage brokerage activities. It has sought to deny an application for a licence, or to revoke a licence, more than 25 times.
The U.S. subprime mortgage crisis shone a spotlight on mortgage brokers in that country. They have come under fire for, in many instances, not requiring enough information (such as proof of income) from borrowers, and for pushing them to take on homes that they could not afford. That’s something that Mr. Selinger referred to when he introduced the new legislation in Manitoba this spring.
Peter Wakefield, vice-president of compliance at Mortgage Intelligence, which has offices in multiple provinces, said he has caught an individual applying to the brokerage with false credentials, and reported the incident to York regional police. “I actually caught him with a forged educational certificate,” he said.
Despite that incident, Mr. Wakefield said he believes there are enough rules governing the industry. “I think there are sufficient rules in place, but what may not be in place in all cases is common sense.”
The privacy commissioner’s audit is being conducted under the Personal Information Protection and Electronic Documents Act, which governs how the private sector must protect consumers’ data.
“An audit is a pro-active activity, and it allows us to go into an organization and get a sense of their personal information practices,” Ms. Hayden said. “We need to have reasonable grounds in order to conduct an audit.”
She said the commissioner’s office hopes to progress quickly enough that it can discuss the issue in a 2009 annual report to Parliament.
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Contact the Jeffrey Team for more information - 416-388-1960
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Preparation can ease stress of bidding war
Mark Weisleder – Toronto Star
Multiple offers. Bidding wars. These typically take place in a seller’s market, when there are more buyers than available properties. Yet we are seeing bidding wars even today, when the market is more balanced. It is very important that buyers are properly prepared for this extremely stressful process.
Comment: Except that we do not have a balanced market right now. I have no idea why anyone says that, there is nothing to support that. We have low listings and high sales, classic definition of a sellers market. Bidding wars all over the place, houses selling the day they are listed. More signs of a sellers market. Buyers being pressured to jump, no time to think, barely able to see two houses before one sells. All signs of a sellers market. Do not let anyone tell you otherwise.
In my view, one of the main problems with the multiple offer process in today’s real estate market is that there are very few rules for how the bidding will be conducted. The process is essentially unfair to buyers. This is not like a silent auction where you get to see what everyone else is bidding and then make a decision as to whether you want to make a higher bid. The seller does not even have to accept the highest bid. For example, a seller may prefer a lower offer, that has no conditions attached to it, to a higher offer that has conditions about financing or home inspections.
Comment: Here I do agree, there are a lot of problems with the way we do this. We need a lot more transparency to make the system work better. Maybe not with prices, but there should be some sort of system to record the agents involved so we all know what we are up against. And even once the deal is done, release the other bids. Not during the process, but after the seller has chosen one, the next day we should all be able to see what everyone offered. A system like this is sure to keep everyone honest.
The seller cannot give out the personal information of the bidders or the amounts being bid and only has the obligation to tell all buyers in the process the actual number of bids received. Sellers can require that all buyers fax in their offers to the seller’s real estate salesperson. Many buyers prefer to present their offers in person.
There are also unscrupulous sellers who falsely claim that they have received other offers in order to fool an unsuspecting buyer to bid higher. It is very hard for a buyer to check this out after the fact, without commencing an expensive lawsuit.
Comment: This really does not happen, more of an urban myth. If you are ever in doubt, ask for the name(s) of the other agent(s) involved. Give them a call and confirm they are bidding on the property. Very easy to confirm, so there should never be any talk of fake offers. If you do not take the time to double-check, then you forfeit your right to complain. And if you lose a bidding war, it is more likely due to underbidding, not because of anyone playing games. And if you think you paid too much, you were the one in control of your own offer, no one forced you to pay that amount.
If you are competing on a property, I recommend that you take the following steps:
Research the general area that you are looking at moving to in advance, so that you can obtain general information about schools, parks, demographics and crime rate.
Walk the streets that interest you and start talking to the neighbours, to get a sense if this is the kind of friendly area that you would like to move your family.
Visit with your lender or mortgage broker in advance to obtain a clear understanding as to what you can afford to spend in order to buy a property, without having to dramatically change your standard of living. It is wrong to sacrifice everything just to afford a more expensive home. You want a home that will create happy memories for a lifetime.
Comment: All of the above should be done regardless of multiple offers.
Work with a professional buyer salesperson. You need to know in advance the real market value of any property that becomes available. Many sellers deliberately list their property for a price that is 5% to 10% below market value, in order to generate interest from many buyers to drive up the price. You cannot be fooled by this tactic. You also need an objective third party to guide you through the negotiating process.
Always make your purchase conditional on a home inspection. In most cases, sellers will permit a buyer to conduct a home inspection in advance of submitting an offer, so that they can make their offer unconditional. The problem here is that a buyer may in fact pay for the cost of a home inspection report, but not have the seller accept his or her offer, as the seller can still choose any offer that he receives.
Comment: In multiple offer situations, it is almost always the offer with no conditions that is accepted. While I would never ever recommend a client remove any offers, they have to in order to win the bidding war. I hate that it is so, but that is simply the way it works these days. Put that condition out and you lose the house, period. And no seller will allow you to conduct a home inspection before you make an offer, trust me.
If you are at all suspicious as to whether there is in fact a competing offer, consider inserting a clause that states that your offer is being submitted on the basis that it is part of multiple offers and that if the seller does not receive another offer, you will have the option to either cancel or revise your offer. You can also include in your clause a requirement that the seller provides the name of the competing real estate brokerage that submitted the other offer. Buyers should consult their own real estate buyer salesperson or lawyer in preparing this clause to ensure complete protection.
Comment: A great idea – except that the listing agent has a legal obligation to reveal the number of offers being made. Thus you should hold onto your offer until you know for sure how many there will be. If you send it in thinking you are the only one, and others arise, then you will be given a chance to revise your offer. It might be better to stay low and use the later chance to revise upwards, rather than the other way around.
Buyers, being prepared for bidding wars will provide you with maximum protection, even as you participate in this very stressful process. Next week, I will discuss how sellers can set the stage for potential bidding wars on their own property.
Mark Weisleder is a lawyer, author and public speaker for the real estate industry who is a regular contributor to Real Estate News.
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Contact the Jeffrey Team for more information - 416-388-1960
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Broken Records
Privacy Commissioner’s comment on examination of records
By Andrea C. Krywonis
Gardiner Miller Arnold LLP, Barristers and Solicitors
1202 – 390 Bay Street, Toronto, Ontario M5H 2Y2
PH: 416-363-2614 | FX: 416-363-8451
gerry.miller@gmalaw.ca | www.gmalaw.ca
When the Personal Information Protection and Electronic Documents Act (Canada) (“PIPEDA”) was first introduced in 2000, some condo lawyers took the position that condominium corporations were exempt from its application because condos do not accumulate private information for commercial purposes. Instead, condos function within the authority of the Condominium Act, 1998 (the “Act”) to manage the property and assets of the condo, as a non-profit organization.
Nonetheless, court and Privacy Commissioner’s rulings have taken the opposite stance and equate the operation of condominium corporations to commercial activity. The Privacy Commissioner’s Case Summary #301 found that a condominium corporation must implement practices to protect personal information and ensure that there is a complaint and inquiry process available with respect to privacy. In Rodgers v. Calvert, the Ontario Superior Court found that any organization, whether non-profit or for-profit, that collects, uses or discloses personal information in the course of commercial activity is subject to PIPEDA.
If we apply the Rodgers principle to condos, the hiring of a property manager or maintenance contractor can be considered commercial activity and most condos collect, use or disclose personal information in the course of administration. Therefore, in most cases where a property manager is hired (and in most condos, such is the case), PIPEDA correspondingly applies and creates restrictions on disclosure of personal information. What then, of requests for examination of records under sec-tion 55(3) of the Act? While access to records came before the courts under the Old Act in the context of the provision or appropriateness of disclosure, it has not yet been adjudicated in the context of PIPEDA.
A colleague of ours has circulated a copy of a letter from the Acting General Counsel of the Office of the Privacy Commissioner of Canada. This letter provides the Privacy Commissioner’s com-ment on PIPEDA and its interaction with section 55 of the Act. An excerpt from the letter states:
“Section 55 of the provincial [Condominium] Act sets out a list of records that a condominium corporation is required to keep, and gives the owner of a unit the right to examine the records of the corporation, subject to specified exceptions. I note under the exception in paragraph 55(4)(c), a unit owner does not appear to be entitled to records relating to specific unit owners.
To the extent that records requested by a third party contain personal information about other individuals, and do not fall within the exception in paragraph 55(4)(c) of the Ontario [Condominium] legislation, the relevant provision under PIPEDA is paragraph 7(3)(i). This provision permits an organization to disclose personal information without the knowledge or consent of the individual if the disclosure is “required by law”. This provision has been interpreted by our Office to include provincial laws. Thus, to the extent that a condominium corporation is required under Ontario legislation to disclose personal information to a third party requester, PIPEDA enables that disclosure to take place.
As noted however, it appears that at least some categories of personal information are protected under Ontario’s Condominium Act.”
This commentary is not groundbreaking. Moreover, the Privacy Commissioner’s letter and Case Summary are not binding precedent. They are, nonetheless, helpful in reinforcing what we have come to accept about how PIPEDA and condos interact and emphasize the need for condominium corporations to have a privacy policy.
PIPEDA has crept into the condo world and it appears that disclosure of records relating to specific owners, normally excepted by s. 55(4)(c), must be made if “required by law.” “Required by law” could mean required under provincial or federal laws or legislation and we suggest that the definition is easily be expanded to federal statutes such as the Criminal Code or Income Tax Act. Hopefully, a condo will not be put into the position to make such a judgment call – as always, take heed and consult your lawyer should you have any concerns with a request to examine records or to implement a privacy policy in your condo.
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Contact the Jeffrey Team for more information – 416-388-1960
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