IN THE MATTER OF the Mortgage Brokerages, Lenders and Administrators Act, 2006,S.O. 2006, c.29, as amended (the “Act”), in particular sections 38 and 39;

AND IN THE MATTER OF Patricia Porretta.

NOTICE OF PROPOSAL TO IMPOSE ADMINISTRATIVE PENALTIES

TO: Patricia Porretta

TAKE NOTICE THAT pursuant to section 39 of the Act, and by delegated authority from the Chief Executive Officer of the Financial Services Regulatory Authority of Ontario (the “Chief Executive Officer”), the Director, Litigation & Enforcement (the “Director”) is proposing to impose two administrative penalties in the total amount of $30,000 on Patricia Porretta:

1. $20,000 for giving false or deceptive information when dealing in mortgages contrary to section 43(2) of the Act; and


2. $10,000 for dealing in mortgages for remuneration when not acting on behalf of a mortgage brokerage and not exempt from the requirement to be licensed contrary to section 2(3) of the Act.

Details of these contraventions and reasons for this proposal are described below. This Notice of Proposal includes allegations that may be considered at a hearing.

SI VOUS DÉSIREZ RECEVOIR CET AVIS EN FRANÇAIS, veuillez nous envoyer votre demande par courriel immédiatement à: contactcentre@fsrao.ca.

YOU ARE ENTITLED TO A HEARING BY THE FINANCIAL SERVICES TRIBUNAL (THE “TRIBUNAL”) PURSUANT TO SECTIONS 39(2) AND 39(5) OF THE ACT. A hearing by the Tribunal about this Notice of Proposal may be requested by completing the enclosed Request for Hearing Form (Form 1) and delivering it to the Tribunal within fifteen (15) days after this Notice of Proposal is received by you. The Request for Hearing Form (Form 1) must be mailed, delivered, faxed or emailed to:

Address:
Financial Services Tribunal
25 Sheppard Avenue West, 7^th Floor
Toronto, ON M2N 6S6

Attention: Registrar

Fax: 416-226-7750

Email: contact@fstontario.ca

TAKE NOTICE THAT if you do not deliver a written request for a hearing to the Tribunal within fifteen (15) days after this Notice of Proposal is received by you, orders will be issued as described in this Notice of Proposal. TAKE FURTHER NOTICE of the payment requirements in section 4 of Ontario Regulation 192/08, which state that the penalized person or entity shall pay the penalty no later than (thirty) 30 days after the person or entity is given notice of the order imposing the penalty, after the matter is finally determined if a hearing is requested or such longer time as may be specified in the order.

For additional copies of the Request for Hearing Form (Form 1), visit the Tribunal’s website at www.fstontario.ca

The hearing before the Tribunal will proceed in accordance with the Rules of Practice and Procedure for Proceedings before the Financial Services Tribunal (“Rules”) made under the authority of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22, as amended. The Rules are available at the website of the Tribunal: www.fstontario.ca. Alternatively, a copy can be obtained by telephoning the Registrar of the Tribunal at 416-590-7294, or toll free at 1-800-668-0128 extension 7294.

At a hearing, your character, conduct and/or competence may be in issue. You may be furnished with further and or other particulars, including further or other grounds, to support this proposal.

REASONS FOR PROPOSAL

I. INTRODUCTION

1. These are reasons for the proposal by the Director to impose two administrative penalties in the total amount of $30,000 on Patricia Porretta (“Porretta”). Porretta contravened the Act by:
   
   
   1. Giving false or deceptive information when dealing in mortgages contrary to section 43(2) of the Act; and
   
   
   2. Dealing in mortgages for remuneration when not acting on behalf of a mortgage brokerage and not exempt from the requirement to be licensed contrary to section 2(3) of the Act.


2. Porretta agreed to arrange a mortgage for a borrower (“A.H.”)


3. Porretta arranged a first mortgage with First National Financial LP (“First National”). Porretta also attempted to arrange a second mortgage with a private individual (“R.D.S.”), contrary to First National’s financing conditions, because A.H. lacked sufficient funds for the down payment.


4. Porretta misled First National by claiming that R.D.S. was A.H.’s uncle and was gifting her the money.


5. Porretta acted outside her mortgage brokerage by intentionally concealing the mortgage arrangement with R.D.S. from her brokerage.


6. Ultimately, R.D.S. did not advance any funds. The deal collapsed. A.H. lost her deposit ($11,000), the lender fee of $7,000, and was unable to purchase the home she had saved for.



II. BACKGROUND

A. Licensing History

7. Porretta was first licensed as a mortgage agent on September 27, 2011 (licence # M11002190). Porretta was continuously licensed until her licence expired on March 31, 2022.


8. During the relevant time, Porretta was authorized to transact mortgage business on behalf of the mortgage brokerage Cashin Mortgages Inc.



B. The Other Parties

i. The Prospective Borrower (A.H.)

9. A.H. wanted to buy a home for her family.


10. A.H. was a single mother with four young children. At the time she sought a mortgage, A.H. earned a modest income and had limited savings. A.H. had a poor credit score due to a previous consumer proposal under the Bankruptcy and Insolvency Act.


11. A.H found a house in Dufferin County (the “Dufferin House”).


12. Since A.H. lacked the funds for a down payment, she hoped to qualify for the down payment assistance program offered by Dufferin County. The program offered an interest free down payment assistance loan secured by a second mortgage. Among other requirements, the first mortgage on the property must be provided by a reputable bank or credit union.


13. In October 2021, A.H. found Porretta through an advertisement on the online marketplace Kijiji.



ii. First National Financial LP

14. First National was a non-bank lender. As a result, A.H. did not qualify for the Dufferin County down payment assistance program. However, Porretta initially assumed that A.H. would qualify.


15. On November 6, 2021, Porretta applied to First National’s alternative lending service (Excalibur) for a mortgage for A.H.


16. Relying upon the False Gift Letter (as defined below), First National offered to provide an 80% mortgage to finance A.H.’s purchase of the Dufferin House.


17. The First National mortgage precluded a second mortgage. The First National mortgage commitment required as a condition of approval: “Subject to no secondary financing.”



iii. The Prospective Second Lender (R.D.S.)

18. Despite the First National condition prohibiting secondary financing, Porretta attempted to arrange a second mortgage funded by a private individual, R.D.S.


19. Porretta believed that she had a romantic relationship with R.D.S. However, R.D.S. may have been an alias. The Financial Services Regulatory Authority (FSRA) has been unable to verify the identity of R.D.S.


20. R.D.S. presented himself as a wealthy private lender, who lived abroad.


21. Initially, Porretta failed to disclose her relationship with R.D.S. to the borrower (A.H.), First National, or the other professionals involved in the sale of the Dufferin House.


22. R.D.S. and A.H. had never met and had no previous relationship



C. The Purchase Offer

23. On October 15, 2021, Porretta informed A.H. that Meridian Credit Union would finance the first mortgage on the Dufferin House. Porretta advised A.H. to “Go get that house…”


24. On October 29, 2021, A.H. offered to purchase the Dufferin House for $599,900, with a closing date of December 2, 2021.


25. A.H. paid a $10,000 deposit to the sellers of the Dufferin House.


26. However, ultimately, Meridian Credit Union did not finance the purchase of the Dufferin House.


27. The closing date was delayed to December 8, 2021, to provide additional time to arrange financing. A.H. agreed to increase her deposit to $11,000.


28. A.H. paid the deposit from her own savings.



D. Porretta Negotiated the R.D.S. Mortgage

29. In November 2021, Porretta negotiated with First National to fund a first mortgage on the Dufferin House and negotiated a second mortgage funded by R.D.S.


30. In the First National mortgage application, dated November 6, 2021 (the “Mortgage Application”), Porretta calculated that 80% of the funding would come from First National, 10% would come from Dufferin County (down payment assistance program), and 10% would come from A.H.’s “Personal Cash”.


31. However, A.H. did not have sufficient savings to fund 10% of the purchase cost and she did not qualify for the down payment assistance program.


32. Porretta offered A.H. a private mortgage in the total amount of $76,000, funded by R.D.S. The mortgage would provide $59,900 to fund half the down payment. The remaining $16,000 would pay for “lender legal, lender fee, broker fee”.


33. Porretta told A.H. that she would need to pay a $4,000 lender fee as a “good faith deposit” immediately.


34. On November 2 and November 3, 2021, A.H. paid this $4,000 fee directly to Porretta via two e-transfers.


35. In the Mortgage Application, Porretta falsely represented the source of half the down payment as A.H.’s “Personal Cash” rather than the R.D.S. mortgage.


36. By mid-November, Porretta learned that A.H. did not qualify for the Dufferin County down payment assistance program. Without this funding, A.H. needed more money to buy the Dufferin House.


37. To address the shortfall, Porretta negotiated a $150,000 private mortgage to be funded by R.D.S. Under this deal, R.D.S. was supposed to pay $125,000 to the lawyer on the transaction to fund the down payment. R.D.S. was supposed to pay the remaining $25,000 directly to A.H.


38. As part of this new deal, Porretta asked A.H. to pay an additional $3,000 as a lender fee, bringing the total to $7,000.


39. On November 28, 2021, A.H. paid Porretta $3,000 in cash. Porretta claims that she sent the lender fee to R.D.S. using Bitcoin.


40. To avoid detection by First National, Porretta instructed that the R.D.S. mortgage should not be registered on title until January 2022, after the Dufferin House purchase closed.



E. The False Gift Letter

41. In dealings with First National, Porretta falsely represented the R.D.S. mortgage as a gift from A.H.’s uncle.


42. On November 25, 2021, Porretta submitted a false gift letter (the “False Gift Letter”) to First National.


43. The False Gift Letter falsely claimed that R.D.S. was giving a genuine gift to A.H. and that R.D.S. was A.H.’s uncle. 


44. In fact, R.D.S. agreed to loan A.H. the money through a second mortgage and R.D.S. had no previous relationship with A.H. Porretta was aware of this since she had arranged the second mortgage and received lender’s fees.


45. Porretta repeated these false claims in her communications with First National.



F. Porretta Acted Outside Her Brokerage

46. Porretta intentionally hid the R.D.S. mortgage transaction from her mortgage brokerage.


47. On November 28, 2021, Porretta sent A.H. an email outlining the terms of the R.D.S. mortgage, using her personal email.


48. In this email, Porretta told A.H.: “Please respond to this email as my Cashin Mortgages site is monitored and since there is now no fee to them for this, they cannot know.”


49. Porretta violated her brokerage’s policies by using her personal email account to conduct mortgage business.



G. The Deal Collapsed

50. In early December 2021, the Dufferin House purchase collapsed when R.D.S. failed to send any money.


51. A.H. never took possession of the Dufferin House.


52. A.H. lost her $11,000 deposit and the $7,000 “lender fee” she paid directly to Porretta.


53. Because the deal collapsed, First National did not receive their $4,799.20 lender fee for financing the first mortgage.


54. Porretta expected to be paid from the $1,500 brokerage fee that Cashin Mortgages Inc. would have collected from the first mortgage if the purchase had closed.



III. CONTRAVENTIONS OR FAILURES TO COMPLY WITH THE ACT

A. False or Deceptive Information

55. Section 43(2) of the Act provides that no mortgage agent shall give false or deceptive information or documents when dealing in mortgages.


56. Porretta gave false information when:


1. Porretta wrote that the source of the $59,900 for the down payment was “Personal Cash” in the Mortgage Application,


2. Porretta sent the False Gift Letter to First National, and


3. Porretta repeated the claim that R.D.S. was A.H.’s uncle and that R.D.S. was giving A.H. money for the down payment.


57. The Director is therefore satisfied that Porretta repeatedly contravened section 43(2) of the Act.



B. Acting Outside the Brokerage

58. Section 2(3) of the Act provides that no individual shall deal in mortgages for remuneration unless they have a licence and are acting on behalf of a mortgage brokerage or are exempt from the requirement to be licensed.


59. The Director is satisfied that Porretta contravened section 2(3) of the Act by dealing in mortgages outside of her brokerage.


60. Porretta intentionally concealed her mortgage dealing from her brokerage by directing the prospective borrower (A.H.) to use her personal email to avoid supervision by the brokerage.


61. Porretta received remuneration for this activity by collecting fees directly from A.H. Porretta claims that she paid these fees directly to R.D.S. using Bitcoin.


62. Porretta also expected to receive remuneration from the brokerage fee ($1,500) for the first mortgage when the Dufferin House purchase closed. While this payment would have been made through the brokerage, it indirectly would have compensated Porretta for brokering the R.D.S. mortgage needed for the purchase to close



IV. GROUNDS FOR IMPOSING ADMINISTRATIVE PENALTIES

63. The Director is satisfied that imposing administrative penalties on Porretta under section 39 of the Act will satisfy one or both of the following purposes under section 38(1) of the Act:


1. To promote compliance with the requirements established under the Act.


2. To prevent a person or entity from deriving, directly or indirectly, any economic benefit as a result of contravening or failing to comply with a requirement established under the Act.


64. The Director is satisfied that two administrative penalties in the total amount of $30,000 should be imposed on Porretta for providing false or deceptive information when dealing in mortgages contrary to section 43(2) of the Act and for acting outside the brokerage when dealing in mortgages contrary to section 2(3) of the Act.


65. In determining the amount of the administrative penalties, the Director has considered the following criteria as required by section 3 of Ontario Regulation 192/08:


1. The degree to which the contravention or failure was intentional, reckless or negligent.


2. The extent of the harm or potential harm to others resulting from the contravention or failure.
   
   
3. The extent to which the person or entity tried to mitigate any loss or take other remedial action.
   
   
4. The extent to which the person or entity derived or reasonably might have expected to derive, directly or indirectly, any economic benefit from the contravention or failure.
   
   
5. Any other contraventions or failures to comply with a requirement established under the Act or with any other financial services legislation of Ontario or of any jurisdiction during the preceding five years by the person or entity.


66. In respect of the first criterion, the Director considered Porretta’s repeated and intentional contraventions of the Act.


67. Porretta knew that the information was false or deceptive. Porretta intentionally provided this false or deceptive information to First National and other professionals—such as the real estate agent and the lawyer—involved in the transaction.


68. Porretta took additional steps to deceive the other parties to the transaction. For instance, Porretta directed that the registration of the second mortgage be delayed to prevent discovery by First National.


69. Similarly, Porretta intentionally evaded supervision by her brokerage when negotiating the second mortgage.


70. The Director has considered that Porretta may be the victim of R.D.S. However, this cannot absolve Porretta of her professional obligations as a licensee.


71. In respect of the second criterion, the Director has considered the serious harm that resulted from the contraventions.


72. By working outside the brokerage, Porretta avoided the restrictions and requirements that might have protected A.H. The false information provided by Porretta ultimately caused the deal to collapse causing significant harm to A.H. when she was unable to purchase the Dufferin House and lost her deposit of $11,000 and her payments to Porretta totaling $7,000. She also paid other expenses anticipating the purchase would close.


73. Other parties and professionals incurred expenses and lost fees when the transaction failed to close. First National lost a lender fee of $4,799.20. Cashin Mortgages Inc. lost its share of the brokerage fee. The real estate agent lost $500 that she provided to assist A.H. and the commission she expected to earn.


74. In respect of the third criterion, the Director is not aware of any effort to mitigate losses or other remedial action taken by Porretta.


75. In respect of the fourth criterion, the Director has considered that Porretta received $7,000 directly from A.H. Porretta claims that she transmitted this money to R.D.S. using Bitcoin, however Porretta has not provided evidence of this funds transfer.


76. Porretta also expected to receive a fee for brokering the first mortgage when the purchase closed.


77. In respect of the fifth criterion, the Director is not aware of any other contraventions or failures to comply with a requirement established under the Act or with any other financial services legislation in Ontario or any jurisdiction in the previous five years.


78. Such further and other reasons as may come to my attention.

Original signed by

Elissa Sinha
Director, Litigation and Enforcement

By delegated authority from the Chief Executive Officer

Si vous desirez recevoir cet avis en français, veuillez nous envoyer votre demande par courriel immediatement a : contactcentre@fsrao.ca.