April 27, 2018 ( Courtesy of Globeandmail.com) – A mortgage brokerage firm that raised millions from investors to finance projects for Fortress Real Developments Inc. has notified clients that it is going out of business.
FMP Mortgage Investments Inc. sent a letter to clients on Wednesday saying it is surrendering its mortgage brokerage licence and suspending all business operations.
“Several recent developments have negatively impacted our business,” the company said in the unsigned letter.
“Recent police activities related to syndicated mortgages have been widely reported in the media, and we are completely in the dark as to the reasoning behind this activity, as well as the current or future status of companies we have partnered with in the past.”
FMP is one of three mortgage brokerage firms that helped raise syndicated mortgages to finance Fortress projects.
FMP, FDS Broker Services Inc. and FFM Capital Inc. all raised funds from thousands of retail investors to finance loans between 2013 and 2017.
Developers affiliated with Fortress borrowed the money to launch real estate projects, many of them condominium developments.
Two weeks ago, the RCMP executed six search warrants at various locations in the Greater Toronto Area, including Fortress’s head office, saying the force is investigating “syndicated mortgage frauds.”
The RCMP did not reveal which locations it searched, but FDS notified clients that it received one of the search warrants, according to a news report.
The RCMP also searched the offices of Building & Development Mortgages Canada Inc. (BDMC), a mortgage broker that represented Fortress. BDMC is located at the same business address as Fortress, court documents show.
FMP’s letter to clients did not say whether it received a search warrant.
The firm was founded in 2013 by Tonino Amendola and David Hysen, both of whom previously worked at BDMC.
Michael Daramola was the principal broker for FMP until his mortgage broker’s licence was revoked in February as part of a settlement agreement the firm reached with FSCO related to its investigation of BDMC and affiliated companies.
Mr. Hysen was then named as principal broker at FMP, but a court filing last week said he had resigned from the company.
In its letter to investors this week, FMP said it now has no principal broker, which is required under Ontario law in order to operate.
FMP said it is also legally prohibited from communicating with customers about specific mortgages without a principal broker. The letter refers clients to an independent trustee overseeing BDMC’s operations for answers to questions about loan agreements or interest payments.
“Our primary concern has always been and will continue to be for you, our customers,” the letter says. “Unfortunately, due to recent circumstances, we will no longer be able to serve you.”
Officials from FMP could not be reached for comment Thursday.
The company’s website has been taken down and its phone number goes straight to voice mail.
According to an affidavit filed in court last week by FSCO lawyer Brendan Forbes, FMP, FFM and FDS were all founded by former employees of BDMC.
BDMC owner Ildina Galati encouraged the employees to leave and set up three arm’s-length companies to “provide some degree of separation” between the brokers helping investors lend money for Fortress projects, and BDMC, which was the broker representing Fortress as the borrower, Mr. Forbes said.
However, he said BDMC continued to provide services that would normally be done by the investors’ brokers, including performing due diligence on projects seeking financing and obtaining land valuations for loans.
More than 11,000 individual investors lent more than $600-million for syndicated mortgage loans brokered by BDMC, FSCO said.
FMP brokered 1,097 syndicated mortgage loans totalling $52.6million in 2016 alone, according to Mr. Forbes’ affidavit.
FSCO reached a settlement agreement in February with officials from FMP, FDS and FFM, revoking licences for all of their principal brokers. Ms. Galati, who was principal broker at BDMC, voluntarily surrendered her licence.
As part of the agreement, a third-party administrator, FAAN Mortgage Administrators Inc., was appointed to oversee BDMC’s syndicated mortgage loans on behalf of investors.
Last Friday, FSCO obtained a court order appointing FAAN as trustee of BDMC, saying the administration agreement had broken down. The trustee order gives FAAN stronger legal powers to manage BDMC and obtain information.
Deborah McCoy – Is an investigative journalist and has over 17 years of investigation experience in both the private and public business sectors. Since joining CFN, Ms. McCoy has become a true advocate for victims of fraud and increasing the public’s awareness in fraud prevention.