A review of documents related to the syndicate mortgage loan that funded in part a residential condominium project in Scarborough, ON called Harmony Village Sheppard. The analysis shows where fees, risks and terms of the loan are disclosed as well as explanations of who certain parties are and what their role is. Through the life of this loan, three different generations of documents were used which progressively improved on disclosure.
OVERVIEW
Project Location: Scarborough, ON
Project Type: Residential Condo Buildings & Townhomes
Developer: City Core Development Inc.
Borrower: Harmony Village-Sheppard Inc.
Fortress Real Developments: Development Consultant
Total Return to lender/investor: Principal: 84.5% (individual lender/investor returns varies based on duration of investment)
The following tables include links to the specific areas of mortgage documents provided to lenders by mortgage brokers where fees, risks, and the terms of contract are located. There is a table for each generation, for example Generation 1 fees, Generation 2 fees and so on. The last set of tables is always Roles, which highlight the areas in the documents where the role of the parties involved are clearly defined.
HVS – Generation 3 Fee Disclosure
Here are the documents where FEES were disclosed in generation 3 documents as well as the exact location they can be found in the document. For reference click on the location to see the specific disclosure language.
| Nam of Document | Location in Document | Description |
| Form 9D | Paragraph 23 | Disbursements for legal fees, mortgage brokering and administration |
| Form 1 Investor/Lender Disclosure Statement | Page 4, # 2 | Fees and additional earnings possible |
| Form 1 Investor/Lender Disclosure Statement | Page 4, #3 | Fees and additional earnings possible |
| Form 1 Investor/Lender Disclosure Statement | Page 4, #4 | Fees and additional earnings possible |
| Form 1 Investor/Lender Disclosure Statement | Page 5, #6 | Fees and additional earnings possible |
| Form 1 Investor/Lender Disclosure Statement | Page 11, Part D, #1 | All fees paid from proceeds of funds raised |
| Form 1 Investor/Lender Disclosure Statement | Page 11, Part D, # 2 | List of fees to be paid |
| Form 1.1 Investor/Lender Disclosure Statement | Page 2, #2 | Fees and additional earnings possible |
| Form 1.1 Investor/Lender Disclosure Statement | Page 3, Part A, # 1 | Where to find use of funds |
| Form 1.1 Investor/Lender Disclosure Statement | Page 5, Part C | Refer to Schedule for Use of Funds |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule “B” | Benefits to Brokerage or Brokers |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule “D” | Borrowers Cost of Borrowing |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule “I” | Use of Funds |
| Memo of Understanding | Page 2, #9 & 10 | Broker must disclose fees to lender |
| Loan Commitment | Page 2, “Fees & Deductions” | Fees and deductions |
HVS – Generation 2 Fee Disclosure
Here are the documents where FEES were disclosed in generation 2 documents as well as the exact location they can be found in the document. For reference click on the location to see the specific disclosure language.
| Name of Document | Location in Document | Description |
| Form 9D | Paragraph 23 | Disbursements for legal fees, mortgage brokering and administration |
| Investor/Lender Disclosure Statement | Page 3, # 3 | Potential for additional earnings by broker of record |
| Investor/Lender Disclosure Statement | Page 3, #4 | Related party has direct interest |
| Investor/Lender Disclosure Statement | Page 3, #10 | Fees may be paid in advance to project completion |
| Investor/Lender Disclosure Statement | Page 6, Part D, #2 | List of administrator, broker and commission fees paid by the borrower |
| Memo of Understanding | Page 2, #9 & 10 | Broker must disclose fees to lender |
| Loan Commitment | Page 2, “Fees & Deductions” | A list of fees and deductions paid by the borrower |
| Investor/Lender Disclosure Statement – Schedule | Schedule “C” # 2 & 4 | Fees paid to Fortress and selling brokerage |
HVS – Generation 1 Fee Disclosure
Here are the documents where FEES were disclosed in generation 1 documents as well as the exact location they can be found in the document. For reference click on the location to see the specific disclosure language.
| Name of Document | Location in Document | Description |
| Form 9D | Paragraph 23 | Legal, Brokerage and other fees |
| Investor/Lender Disclosure Statement | Page 3, # 3 | Potential for additional earnings by broker of record |
| Investor/Lender Disclosure Statement | Page 3, #4 | Referring parties may receive additional earnings |
| Investor/Lender Disclosure Statement | Page 3, #5 | Disclosure of material interest |
| Investor/Lender Disclosure Statement | Page 3, #10 | Potential for future remuneration |
| Investor/Lender Disclosure Statement | Page 6, Part D, #2 | Fees and costs payable by the borrower |
| Loan Commitment | Page 2, “Fees & Deductions” | Fees and Interest Reserve |
| Memo of Understanding | Page 2, #9 & 10 | Obligation to disclose referral and duties of Licensed Mortgage Agents/Broker |
HVS – Generation 3 Risk Disclosure
Here are the documents where RISKS were disclosed in generation 3 documents as well as the exact location they can be found in the document. For reference click on the location to see the specific disclosure language.
| Name of Document | Location in Document | Description |
| Form 9D | Page 5, Section “Warning” | Warning to assess risk before investing |
| Project Fact Sheet | Page 3 – 5 “material disclosure” – “Conflicts of Management and Others” | A list of risks and potential for conflicts of interest |
| Participation and Servicing Agreement | Page 1, Defined Term “Force Majeure” | Definition for Force Majeure Clause |
| Form 1 Investor/Lender Disclosure Statement | Page 2 “Caution” | Caution to seriously assess risks |
| Form 1 Investor/Lender Disclosure Statement | Page 5, Section 2, # 6 | Description of potential conflicts |
| Form 1 Investor/Lender Disclosure Statement | Page 6, Section 2, #12 | Description of risk |
| Form 1 Investor/Lender Disclosure Statement | Page 12, Part E | Description of attached documents with emphasis to review them |
| Form 1.1 Investor/Lender Disclosure Statement | Page 3, Section 3, Part A #4 | Previous power of sale proceedings including the developer |
| Form 1.1 Investor/Lender Disclosure Statement | Page 3, Section 3, Part A #5 | Previous regulatory charges and current civil proceedings |
| Form 1.1 Investor/Lender Disclosure Statement | Page 5, Part C | Additional disclosure for review |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule “A” | Detailed explanation of the relationship between the mortgage brokerage and the borrower/developer |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule “F” | Directors, Officers, Owners and Partners disclosure |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule “G” | Details about civil proceedings |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule “J” | Conflicts of Interest |
HVS – Generation 2 Risk Disclosure
Here are the documents where RISKS were disclosed in generation 2 documents as well as the exact location they can be found in the document. For reference click on the location to see the specific disclosure language.
| Name of Document | Location in Document | Description |
| Form 9D | Page 5, Section “Warning” | Warning |
| Project Fact Sheet | Page 4 – 5 “material disclosure” – 1 and 2 “Conflicts of Management and Others” | A list of risks and potential for conflicts of interest |
| Investor/Lender Disclosure Statement | Page 2 “Caution” | Caution, high risk |
HVS – Generation 1 Risk Disclosure
Here are the documents where RISKS were disclosed in generation 1 documents as well as the exact location they can be found in the document. For reference click on the location to see the specific disclosure language.
| Name of Document | Location in Document | Description |
| Form 9D | Page 5, Section “Warning” | Warning |
| Loan Commitment | Schedule “B” Section “Please read Carefully” | Cautionary statements about the mortgage investment |
| Investor/Lender Disclosure Statement | Page 2 “Caution” | Caution, high risk |
HVS – Generation 3 Contract Disclosure
Here are the documents where TERMS were disclosed in generation 3 documents as well as the exact location they can be found in the document. For reference click on the location to see the specific disclosure language.
| Name of Document | Location in Document | Description |
| Form 9D | Paragraphs 10, 11, 12, 18, 19, 21, 22 | Value, LTV, Maturity, Partial discharges, Registered in name of trustee, First ranking mortgage and other terms |
| Mortgage Investment Direction & Indemnity Agreement | Page 1 # 4 a-c | Tax Implications |
| Mortgage Investment Direction & Indemnity Agreement | Page 1 #5 | Indemnity of Olympia Trust |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule “D” | Borrowers cost of borrowing as disclosed to the borrower |
| Project Fact Sheet | Page 1, “Valuation” | Opinion of Value |
| Project Fact Sheet | Page 1, “Face Value of Syndicate Mortgage” | Maximum face value |
| Project Fact Sheet | Page 1, “Loan to Value” | Loan to Value |
| Project Fact Sheet | Page 2, “Construction Financing” | Amount of future construction financing |
| Project Fact Sheet | Page 2, “Term” | Maturity and extension dates |
| Project Fact Sheet | Page 3, “Maximum Future Increases in the 1st Mortgages” | Maximum value of future financing |
| Loan Commitment | Section 5.01 | Potential future amendments and the requirement to postpone to future financing |
| Loan Commitment | Section 6.02 | Acknowledgement and agreement that future priority financing will be required to complete the project. |
| Loan Commitment | Section 7 | Acknowledgements that trustee may act on lenders behalf and the lender agrees to indemnify the trustee |
| Acknowledgement and Consent Agreement – Lender | Section 2, 3, 4, 5, 6, 7, 8, 9, 11, 19, 20 | Terms acknowledged and consented to by the lender |
| Participation and Servicing Agreement | Section 3.2, 3.5 | Hiring of experts; consent |
HVS – Generation 2 Contract Disclosure
Here are the documents where TERMS were disclosed in generation 2 documents as well as the exact location they can be found in the document. For reference click on the location to see the specific disclosure language.
| Name of Document | Location in Document | Description |
| Form 9D | Paragraphs 10, 11, 12, 18, 21, 22 | Value, LTV, Maturity, partial discharges, entity holding first ranking mortgage and other terms of the loan |
| Mortgage Investment Direction & Indemnity Agreement | Page 1 # 4 a-c | Tax Implications |
| Mortgage Investment Direction & Indemnity Agreement | Page 1 #5 | Indemnity of Olympia Trust |
| Investor/Lender Disclosure Statement | Part “E” | Documents to be provided by broker |
| Investor/Lender Disclosure Statement – Schedule | Schedule “B” | Loan To Value Ratio |
| Project Fact Sheet | Page 1, “Valuation” | Opinion of Value |
| Project Fact Sheet | Page 1, “Face Value of Syndicate Mortgage” | Maximum face value |
| Project Fact Sheet | Page 2, “Loan to Value” | Loan to Value |
| Project Fact Sheet | Page 2, “Construction Financing” | Amount of future construction financing |
| Project Fact Sheet | Page 2, “Term” | Maturity and extension dates |
| Project Fact Sheet | Page 3, “Maximum Future Increases in the 1st Mortgages” | Maximum value of future financing |
| Loan Commitment | Section 5.01 | Potential future amendments and the requirement to postpone to future financing |
| Loan Commitment | Section 6.02 | Acknowledgement and agreement that future priority financing will be required to complete the project. |
| Loan Commitment | Section 7 | Acknowledgements that trustee may act on lenders behalf and the lender agrees to indemnify the trustee |
| Acknowledgement and Consent Agreement – Lender | Section 2, 3, 4, 5, 6, 7, 8, 9, 10, 17, 18 | Terms acknowledged and consented to by the lender |
| Participation and Servicing Agreement | Section 3.2, 3.5 | Hiring of experts; consent |
HVS – Generation 1 Contract Disclosure
Here are the documents where TERMS were disclosed in generation 1 documents as well as the exact location they can be found in the document. For reference click on the location to see the specific disclosure language.
| Name of Document | Location in Document | Description |
| Form 9D | Paragraphs 8, 9, 10, 11, 12, 18, 21, 22 | Value, LTV, Term, Maximum financing, use of funds |
| Mortgage Investment Direction & Indemnity Agreement | Page 1 # 4 a-c | Indemnity of Olympia Trust |
| Mortgage Investment Direction & Indemnity Agreement | Page 1 #5 | Tax Implications |
| Loan Commitment | Schedule “D”, Section 5.01 | Potential future amendments and the requirement to postpone to future financing |
| Loan Commitment | Schedule “D” Section 7 | Acknowledgements that trustee may act on lenders behalf and the lender agrees to indemnify the trustee |
| Loan Commitment | Schedule “D”, Section 6.02 A-D | Acknowledgement and agreement that future priority financing will be required to complete the project. |
HVS – Generation 3 Role Disclosure
Here are the documents where the ROLES of each party were disclosed in generation 3 documents as well as the exact location they can be found in the document. For reference click on the location to see the specific disclosure language
| Name of Document | Location in Document | Description |
| Memo of Understanding | Paragraphs 2, 3, 4, 10 & last paragraph | Offered by Mortgage brokers, not Fortress, Duties of mortgage broker |
| Acknowledgement and Consent Agreement – Lender | Page 1, Paragraph 1 | Name of borrower |
| Project Fact Sheet | Page 1, “Developer Name“, “Borrower Name“ | Developer name, borrower name |
| Project Fact Sheet | Page 5-8, “About the Developer” | About the developer |
| Investor/Lender Disclosure Statement | Page 1, “Important – New Disclosure Duties Effective January 1, 2009” | Duties of mortgage broker |
| Investor/Lender Disclosure Statement | Page 4, Section 2, #1 | Declaration by the mortgage broker |
| Investor/Lender Disclosure Statement | Page 4, Section 2, #2 ,3 & 4 | Declaration by the mortgage broker, additional earnings and profits possible |
| Investor/Lender Disclosure Statement | Page 9, Section 3, Part B, #1 | Mortgage Particulars – registered in the name of trustees |
| Investor/Lender Disclosure Statement | Page 11, Section 3, Part C | Name and address of borrower |
| Form 1/1.1 Investor/Lender Disclosure Statement – Schedule | Schedule A | Detailed explanation of the relationship between the Mortgage Brokerage and the Borrower/Developer |
| Loan Commitment | Page 1, “Guarantor” | Who is the guarantor |
| Loan Commitment | Page 1, “Borrower/Mortgagor” | Who is the borrower |
| Loan Commitment | Page 3, Paragraph 1, “Solicitor” | Role of Solicitor |
| Loan Commitment | Schedule “D”, Section 5.02 | Charge registered in name of trustee and may be amended or transferred |
HVS – Generation 2 Role Disclosure
Here are the documents where the ROLES of each party were disclosed in generation 2 documents as well as the exact location they can be found in the document. For reference click on the location to see the specific disclosure language
| Name of Document | Location in Document | Description |
| Memo of Understanding | Paragraphs 2, 3, 4, 10 & last paragraph | Offered by Mortgage brokers, not Fortress, Duties of mortgage broker |
| Acknowledgement and Consent Agreement – Lender | Page 1, Paragraph 1 | Name of borrower |
| Project Fact Sheet | Page 1, “Developer Name“, “Borrower Name” | Developer name, borrower name |
| Project Fact Sheet | Page 5-8, “About the Developer” | About the developer |
| Investor/Lender Disclosure Statement | Page 1, “Important – New Disclosure Duties Effective January 1, 2009” | Duties of mortgage broker |
| Investor/Lender Disclosure Statement | Page 3, # 1, 2, 5 | Declaration by the mortgage broker |
| Investor/Lender Disclosure Statement | Page 5, Part B, #3 | Name of mortgage administrator |
| Investor/Lender Disclosure Statement | Page 6, Part C, #1 | Name and address of borrower |
| Participation and Servicing Agreement | Section 1.1 “Borrower” & “Participants“ | Definition of borrower and participants |
| Loan Commitment | Page 1, “Guarantor” | Who is the guarantor |
| Loan Commitment | Page 1, “Borrower/Mortgagor” | Who is the borrower |
| Loan Commitment | Page 3, Paragraph 1, “Solicitor” | Role of Solicitor |
| Loan Commitment | Schedule “D”, Section 5.02 | Charge registered in name of trustee and may be amended or transferred |
HVS – Generation 1 Role Disclosure
Here are the documents where the ROLES of each party were disclosed in generation 1 documents as well as the exact location they can be found in the document. For reference click on the location to see the specific disclosure language
| Name of Document | Location in Document | Description |
| Form 9D | Page 1, “Name and Address of the Borrower” | Name and address of borrower |
| Form 9D | Page 1, “Name and Address of Guarantors” | Name and address of guarantor |
| Memo of Understanding | Paragraphs 2, 3, 4, 10 & last paragraph | Duty of licensed mortgage agent/broker |
| Loan Commitment | Page 1, “Guarantor” | Name of guarantor |
| Loan Commitment | Page 1, “Borrower/Mortgagor” | Name of borrower |
| Loan Commitment | Page 3, Paragraph 1, “Solicitor” | Role of Solicitor |
| Loan Commitment | Schedule “D”, Section 5.02 | Who the trustees are |
| Investor/Lender Disclosure Statement | Page 1, “Important – New Disclosure Duties Effective January 1, 2009” | Disclosure Duties for Brokerages and Administrators |
| Investor/Lender Disclosure Statement | Page 3, # 1 & 2 | Declaration by the mortgage brokerage |
| Investor/Lender Disclosure Statement | Page 5, Part B, #3 | Name of mortgage administrator |
An Exculpatory Look at Syndicate Mortgage Investments 
