Kelowna mortgage broker fined $25K after sale falls through

A Kelowna mortgage broker is on the hook for $30,000 after he facilitated a mortgage which didn’t cover the price of the property.

According to a July 3 BC Financial Services Authority decision, mortgage broker Ryan Stewart Avery failed to adequately inform the borrowers of the terms and conditions of their mortgage and failed to give them a copy of commitment letters from the lender.

The financial regulator fined Avery $25,000 and ordered him to pay costs of $4,773.

The decision says Avery was working with his clients on purchasing a $680,000 home in late 2022.

The buyers had previously been denied a mortgage, but Avery said he’d try to get them one.

The property the couple wanted was valued at $680,000, but later reduced to $650,000.

In order to get their new home the couple were going to sell their property and refinance another property they owned, and mortgage the rest.

Avery applied for a traditional mortgage for the couple but the lender wanted the buyers’ house sale to pay off their debts, including a car loan. The buyer told Avery she didn’t want to pay off her car loan.

The mortgage broker then sent the buyer an email saying she was approved for a mortgage for the property.

“The email did not contain details of the financing commitment or the name of the lender,” the BC Financial Services Authority said in the decision.

Avery called his clients the next day and discussed the approval of the mortgage.

“At no point in time did Mr. Avery provide (the buyers) with a copy of the First Commitment from the lender,” the decision reads.

While the buyers, through Avery, had gotten them a mortgage through a traditional lender, he’d secured a mortgage through a private lender.

A few weeks later, the buyers reached a deal with the sellers that they’d pay $650,000 for the house and a number of items would be excluded. Those items would then be bought with the buyers’ $50,000 line of credit.

The buyers’ home then sold for $313,000, which was $42,000 less than the listed price.

“Mr. Avery responded asking whether the buyers were 100%, as a previous sale had fallen through, and indicated he would need a copy of the waiver confirming the sale was binding on the parties. Mr. Avery did not advise of any concerns or changes in financing,” the decision reads.

Later that day, the subjects were removed from the property.

He told the couple the file was moving forward, but they thought he was referring to the traditional lender, not the private lender.

The private mortgage had an annual interest rate of 11.24% compounded monthly with payments of $6,021 over a 12-month term.

The total amount of the mortgage was $642,900 but once lender, broker, and legal fees were deducted, the net mortgage amount was $610,619.

When the couple were at their notary’s office reviewing the mortgage payments, they determined they hadn’t received enough funds from the private lender to buy the property.

The notary contacted Avery, saying the couple didn’t have enough money to buy the house, and he texted back a photo of a handwritten note.

“The handwritten note provided a breakdown of how Mr. Avery believed that the property could be financed which included using the buyers’ $50,000 line of credit and… paying off her car loan,” the decision reads.

“At no point in time did Mr. Avery adequately explain the terms of the Second Commitment to the buyers,” the regulator said.

The couple were forced to back out of the sale.

The decision doesn’t give any indication of whether the couple lost money, but typically, a deposit would have been paid once the subjects are removed.

The decision says Avery has been a licensed mortgage broker since 2016 and has no discipline history. He signed a consent agreement admitting to his conduct.

He has 30 days to pay the fine.