The Financial Services Commission of Ontario (FSCO) failed to make planned checks on mortgage brokers it had identified as risky due to stretched resources, according to documents obtained under freedom of information laws and information provided by the regulator itself.
FSCO planned to complete five on-site examinations of mortgage brokerages identified as risky this fiscal year, which ends on March 31. But as of Dec. 31, it had not completed any of them, according to data provided to Reuters.
During the same period, FSCO staff conducted only four out of 50 planned “desk reviews,” which are similar to on-site examinations but less detailed.
The findings call into question whether mortgage brokers, who originate 30% to 40% of new loans in the Canadian mortgage market, are being adequately supervised as record household debt and rising interest rates make it tougher for borrowers to make repayments.
The audit stated that FSCO was “operating in a challenging regulatory environment with limited resource to carry out its supervisory activities." Meanwhile, in its 2017/18 annual report, FSCO said it had 382 staff and an annual budget of $56.5 million. Its annual budget had dropped by 40% since 2015/16, partly reflecting the transfer of its dispute-resolution services activities to another Ontario government department.
FSCO is due to be replaced by the Financial Services Regulatory Authority (FSRA) in the spring, but it is currently unclear whether FSRA will have more resources than FSCO.