Slap on the Wrist for Bank Fraud

RECO Discipline

A real estate agent worked at a Brokerage in which one of the other agents happened to be a mortgage broker as well. But, this person is prepared to commit fraud. Can they find money for you? Of course they can. They will just make up the paperwork if need be.

On February 15, 2020, two Buyers sign a BRA with the agent. They decide to purchase a pre-construction property (through assignement) and ultimately due to the increase in price decide to sell it by way of “assignment”. This will require the consent of the Developer. That’s a normal provision in the Agreement.

11 March 2020, the real estate brokerage representing the Developer advised that the Assignees were required to provide a mortgage preapproval before the Developer would agree to finalize the assignment.

17 March 2020, the real estate agent at the Brokerage who was also a mortgage broker sent a mortgage preapproval letter for the Assignees to the first agent.

It was from Company A and it was signed by the mortgage broker. It showed that the Assignees were pre-approved for $493,599.20.

The Developer advised the agent who informed the mortgage broker that the Company A was not satisfactory, and that a preapproval letter from a financial institution was required.

The agent did not inform the Assignees that the Company A had been rejected, nor that he had asked the mortgage broker for a preapproval from a financial institution.

The agent forwarded the revised Bank A Letter to Assignor’s real estate agent at 5:25 p.m. that same day, again without advising the Assignees.

The law firm representing the Developer on the assignment discovered that the Bank A Letter had been falsified. All this took, of course, was a simple phone call to the Bank, and naturally, the Bank had never heard of these two Assignors let alone approved them for a mortgage.

The Listing agent called the Assignee’s agent and advised him that the Developer had found the Bank A Letter to be fraudulent and that the Developer was no longer interested in dealing with the Assignees.

7 August 2020, a release for the assignment sale was agreed upon between the Assignor and the Assignees, with the Assignees forfeiting $17,930.91.

While indeed it appears that the mortgage fraud was undertaken by the mortgage broker, it also appears that the agent representing the Assignees knew about it, or at least had far more information available to him than the Developer’s lawyers.


This was a breach of 4, 23 and 39 of the Code of Ethics.

Best interests

4. A registrant shall promote and protect the best interests of the registrant’s client.

Steps taken by registrant

23. A registrant shall inform a client of all significant steps that the registrant takes in the course of representing the client.

Unprofessional conduct, etc.

39. A registrant shall not, in the course of trading in real estate, engage in any act or omission that, having regard to all of the circumstances, would reasonably be regarded as disgraceful, dishonourable, unprofessional or unbecoming a registrant.

The RECO decision was made on 22 August 202 and the registrant was given until October 27, 2022 to take two 90 minute Courses and pay a $7,000.00 fine.


How about these extra three provisions in the Code:

Inaccurate representations

37. (1) A registrant shall not knowingly make an inaccurate representation in respect of a trade in real estate.  O. Reg. 580/05, s. 37 (1).

(2) A registrant shall not knowingly make an inaccurate representation about services provided by the registrant.  O. Reg. 580/05, s. 37 (2).

Error, misrepresentation, fraud, etc.

38. A registrant shall use the registrant’s best efforts to prevent error, misrepresentation, fraud or any unethical practice in respect of a trade in real estate. 

Abuse and harassment

40. A registrant shall not abuse or harass any person in the course of trading in real estate.

Inaccurate, of course, the Bank didn’t know anything about this. Fraud, yes, why pass on that, it’s the “big one”. Abuse, truly someone trying to victimize you and defraud you is committing some kind of “abuse”.

However, apparently not here!

Likely, this agent went to this mortgage broker at the office because he “knew” that this mortgage broker could pull out all the “stops”.

This situation is disgraceful. It should have a substantially larger fine, and a substantial suspension. This is really a case of getting off light.

While I would have thought that the “fraud’ part should have been pursued, this decision focused on not keeping the Assignees “in the loop”.

In fact, keeping them “out of the loop” made good sense, since they would not themselves be participating in any kind of fraud.

Sorry, this was not truly Bank fraud, nor was it an attempt at bank fraud. The deception was directed to the Developer, and the Developer “caught it”, so it actually didn’t happen. So, maybe I should change the title to: “Slap on the Wrist for Attempted Developer Fraud”.

Brian Madigan LL.B., Broker

Leave a Reply

Your email address will not be published. Required fields are marked *