Maroc - STOREYS.COM - A La Une - 14/Aug 14:51

Richmond Hill Mortgage Lender Placed In Receivership Amid $10M Debt, Claims Of Fraud

According to filings in the Ontario Superior Court of Justice, in early-August, the Richmond Hill private mortgage lender Equityline SPV Limited Partnership was placed under receivership after failing to repay over $10M in loans to its sole creditor, Equitable Bank.Equityline is the owner of approximately 34 residential mortgage loans, mostly valued at under $1M, totalling $18M. The company has been placed under receivership for its debts owed to Equitable Bank, but saw its chances of getting out of receivership squashed due to allegations of fraudulent mortgage practices and deceit.As a result, KSV Advisory has been appointed receiver over the company’s loans. The ReceivershipIn early-August 2022, Equityline entered into a credit agreement with Equitable Bank, which granted them a revolving credit facility of roughly $13M. The credit was essentially meant to provide the capital required for Equityline to conduct its business. As further security over the credit, the company entered into a custodial agreement with Computershare Trust Company of Canada, meaning that Computershare held legal title of Equityline’s mortgages. When enough debts had been accrued, Equitable Bank issued a demand letter in late-April 2024, seeking repayment of amounts totalling $13,617,097 — a sum which, as of now, Equityline has not paid back in full.Additionally, Equitable Bank alleged that the mortgage lender had been submitting inaccurate monthly reports that said many of the mortgages were late on payments by 30 to 90 days, though the Bank was made to think payments continued to be made. In reality, 27 of the 34 mortgages were in default, allegedly impacting around $11M of the $13.6M owed, or approximately 80% of the total debt.In mid-May 2024, Equityline paid out four of the defaulted mortgages, bringing the total owed down to its current debt of $10,073,480. Still, 70%, or 22 of the now 30 mortgages, and 80% of the total loan value, remain impacted.On top of that, according to Equitable Bank, before they and Computershare were made aware of the defaults, Equityline filed 33 lawsuits to collect on the defaulted mortgage loans without letting Computershare or the Bank know. This put Computershare at risk and made them retract their custodianship. However, Equitable Bank convinced them to extend their custodianship until after a receiver was appointed.As well, after KSV Advisory conducted a review of the Debtor’s financials and operations in late-April, they found that nine of the mortgages Equitable Bank believed were being held in security had actually been discharged or postponed without Computershare or the Bank knowing, and without rightful payment being made to the Bank. In his affidavit, CEO of Equityline Sergiy Shchavyelyev asserted that “there was an accounting error.”As a result of these alleged shortcomings, and despite the fact that Equityline had been supplementing interest payments to them, Jackson Chan, Equitable Bank’s Associate Director of Special Loans, stated in an affidavit that the Bank “has no confidence in Equityline to administer the mortgage portfolio.”Equitable Bank applied for receivership on June 5, 2024, and despite Equityline’s argument that it would be “cost prohibitive” for a receiver to enforce the mortgages, the Judge ultimately decided that, “given the circumstances,” a receiver would be appointed. Last Thursday, the receivership order was issued, making KSV Advisory the receiver.