FSRA has noticed a growing number of misleading and overly optimistic advertisements soliciting investors’ funds to invest in mortgages.

We remind mortgage professionals that advertising must be accurate, clear and avoid making misleading claims. Appropriate advertising helps consumers and investors make an informed choice.

Difference between mortgage investments and real estate investments

Investing in mortgages involves lending money to a borrower with real estate as the underlying security; returns are generated primarily through interest payments on the loan.

On the other hand, real estate investments generally involve purchasing and owning a property; returns are generated through rental income and property appreciation.

Mortgage investments have inherent risks such as being subject to interest rate fluctuations, economic and real estate market downturns and borrower defaults.

Advertising mortgage investments?

What the law says you must do:

  • Provide clear and accurate information: advertising must provide clear, accurate and concise information about the mortgage investment. This includes having clear and accurate descriptions of the terms and conditions, interest rates and any repayment conditions
  • Use realistic projections: any projected returns described in advertising must be based on realistic and current market data and analysis. Unrealistic or inflated returns can be viewed as false, misleading or deceptive and are prohibited[1]

What the law says you can’t do:

  • Provide misleading information: advertising must not contain false, deceptive or misleading statements. This includes any untruths or omissions that could mislead potential investors[2].
  • Guarantee returns: advertising must not suggest that returns are guaranteed. All investments carry inherent risks; claims of a safe investment and guaranteed returns are misleading and prohibited[3].
  • Make excessively optimistic claims: promises of returns in advertising must be realistic and based on sound market data and analysis. Excessive optimism in the investment or overpromising of returns can be misleading to potential investors and is prohibited[4].

[1]O. Reg. 188/08, s. 7 Prohibition re public relations materials
[2]O. Reg. 188/08, s. 7 Prohibition re public relations materials
[3]O. Reg. 188/08, s. 16. Restriction re guarantees
[4]O. Reg. 188/08, s. 7 Prohibition re public relations materials