Ian Mulgrew: 'Wild West' financing snares widow's home
Credit to Author: Ian Mulgrew| Date: Wed, 06 Nov 2019 23:39:54 +0000
An 89-year-old widow is facing eviction from the West Vancouver home her parents built in 1954 over a mortgage dispute that exposes the risks of B.C.’s “Wild West” of private lending.
A retired teacher, Donna Mae Galpin recently won a reprieve after a B.C. Supreme Court justice found the circumstances of the foreclosure raised concern she was being taken advantage of.
“There was no investigation as to her ability to make the payments and no direct contact with her by the mortgage broker,” Justice Catherine Murray said.
In a market where multi-million-dollar homes can be tempting bank accounts and there are few legislative protections or effective regulatory oversight of borrowing, to say “caveat emptor” would be a huge understatement.
At issue is a home on Haywood Avenue valued at roughly $3 million bequeathed to Galpin in 1986 by her parents. Her husband died in 2010 and her married daughter and grandchildren live with her.
In 2010, according to Murray, Galpin accepted financial advice from Timothy Langenberg, a friend who called her “mom”. He suggested she take out a reverse mortgage to invest in a development he was promoting in Gibsons.
Galpin agreed and Langenberg set up a company, Salish Sea Environmental Enterprise, making her a 50/50 partner.
When the real-estate project became a black hole, Galpin poured in more and more money using her house as security.
Langenberg “continually reassured her that there was no risk and that she would receive a significant return,” Murray said.
By the fall of 2016, however, mortgages against the home for roughly $2.6 million were in default. Langenberg offered to secure a new one.
“There is a suggestion that Mr. Langenberg had a connection to the mortgage broker, Robert Maters,” Murray said. “That connection is unclear, however, Ms. Galpin attests that Mr. Langenberg advised her that Mr. Maters was his good friend and that he was going to invest in the Gibsons project and pay off all the debt.”
In October 2016, Galpin agreed to a 15-month mortgage with Astina Mortgage Group for $3.275 million.
The interest-only payments were $24,562.50 a month for the first year and $32,750 for the remaining three months. The first year’s payments, $294,750, were deducted from the mortgage proceeds along with a lender fee of $147,375 and a mortgage broker’s fee of $32,750.
“Langenberg advised Ms. Galpin that her home was safe as the payments toward the mortgage would be made from the proceeds of the mortgage,” Murray wrote.
The mortgage financing was subject to Galpin seeking legal advice attesting to her capacity to sign the loan agreement and confirmation existing mortgages were not in default.
“Those conditions were not met,” the justice said. “The Certificate of Independent Legal advice says nothing about Ms. Galpin’s capacity and all three mortgages were in default. Yet the mortgage proceeded.”
But it did not help her out of her financial straits.
In March 2018, Astina notified Salish Sea and Galpin that foreclosure proceedings would begin if the outstanding sum of $3.4 million (increasing more than $1,000 a day) was not paid within 10 days.
Langenberg told her not to worry, she said.
Astina obtained an order to sell the home on Feb. 21, 2019.
Galpin said she called Langenberg after speaking with the realtor. He again said, “Don’t worry.”
In July, Astina accepted its own offer of $2.7 million for the property.
Facing eviction, Galpin petitioned the Supreme Court to intervene, claiming she was not even aware the home was in foreclosure and had been sold until Sept. 2.
In a Sept. 30 affidavit, she clarified that she didn’t receive the legal notices because “my daughter collects the mail … (and) withheld documents from me. … I did speak with the realtor on the phone, but only for the purpose of assisting her with showings.”
Galpin insisted that Astina’s mortgage was unconscionable.
“She argues that Astina engaged in predatory lending by granting a large mortgage to a vulnerable then-86-year-old woman who was living on a pension of $3,000 per month and had no prospect of ever being able to make the payments,” Murray explained. “Ms. Galpin maintains that Astina’s sole purpose in lending the money was to collect what she calls an excessive lender fee, collect the interest, then take her property.”
Astina’s lawyer George Gregory vehemently disagreed and argued the firm bought Galpin another 15 months in her house.
“What frustrates me is we did her a favour — she was going to lose that damn house,” he complained. “She could have sold her home, paid off the mortgage and be left with money in the bank. She got another year, and property values went up by 30 per cent. If she sold right at the end of that year, she would have been $400,000 better off.”
Galpin’s lawyer Brian Coen said he was trying to determine what happened.
“Private lending has been referred to as the Wild West of lending for good reasons,” Coen said.
“Private lenders are not subject to the same regulations that banks (subject to federal regulations) and credit unions (subject to provincial regulations) are subjected to. They are, for the most part, unregulated, especially in the commercial lending sector. The Business Practices and Consumer Protection Act does afford some protection and may have some application in this case, but is limited in its application to mortgages and its protection of guarantors and, for the most part, is restricted to consumer transactions.”
Gregory maintained the mortgage wasn’t covered by the act because Galpin was a partner in Salish Sea and that Astina was the victim.
“We are left to wonder whether Mr. Langenberg was a cockeyed optimist, or just a developer who got caught in the 2018 downturn in the market, as so many developers were,” he said.
“Astina now stands to lose about $2 million. There is nothing in Ms. Galpin’s affidavits or notice of application that even hints at misconduct by Astina. She lays all her complaints at the feet of Mr. Landenberg.”
Murray ruled a full trial was necessary: “After much consideration, I am satisfied that there is some evidence upon which an argument can be advanced that this was an unconscionable mortgage that took advantage of a vulnerable elderly woman.”
None of the claims made by either side have been proven.