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June 26, 2018 | Capital Hell Unfolding for Yield-Reaching Investors (again)

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

As the safest deposit and bond yields fell since the 2008 recession, people who could not afford/did not want capital losses migrated–willfully blind/desperate/greedily–into yield-reaching harm’s way.  One popular area has been ‘syndicated mortgages’ where borrowers find private lenders to loan money on properties instead of going to a bank.  Trouble is that most often these loans are subordinate to banks and other claimants already on the land and buildings.  No free lunch.  More pain and suffering coming in the Canadian mortgage market. See:  Fortress investors could face ‘significant losses.’

More than 11,000 investors – most in Ontario – invested $560-million to provide syndicated mortgage loans to Building and Development Mortgages Canada Inc., which raised the money to help finance 44 development projects for Fortress and its partners.

BDMC is owned by Ildina Galati, a former mortgage broker who surrendered her broker license in February as part of a settlement deal with Ontario’s financial regulator. BDMC was the principal mortgage broker for Fortress, and operates from the same office address. Vince Petrozza, co-founder and chief operating officer of Fortress, was also a registered mortgage broker with BDMC until his registration was revoked in February.

In its update, FAAN said it has spent much of its time as receiver dealing with applications from senior lenders who have priority claims on many of the development projects and are seeking to foreclose or seize the properties because of non-payment of their loans.

FAAN said it needs more time and money to do more appraisals of the projects to find the best potential outcomes for the syndicated lenders, whose loans often rank in third place or lower to those of other lenders.

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June 26th, 2018

Posted In: Juggling Dynamite

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