The short version
- FSRA, Ontario's mortgage regulator, says private mortgages remain a legitimate option for borrowers who no longer qualify with a traditional lender.
- In its own compliance reviews, FSRA has found that a majority of private mortgage files lacked properly documented suitability assessments and exit strategies.
- The share of Ontario mortgage consumers who identify as financially vulnerable has risen from 22% to 39%, according to FSRA's own consumer research.
- Every private mortgage is supposed to come with a documented exit strategy — a plan for qualifying for lower-cost financing once the term ends. Asking to see it in writing is the single most useful question a borrower can ask.
Why the regulator is watching this sector more closely
A private mortgage isn't a red flag on its own. Ontario's Financial Services Regulatory Authority is explicit that private lending remains a vital option for borrowers who no longer qualify at a traditional lender — someone self-employed with complex income, someone rebuilding credit, or someone who needs financing on a tighter timeline than a conventional approval allows.
What FSRA has flagged, in its 2025-26 supervision plan and reported by Canadian Mortgage Trends, is that a mix of pressures — rising borrower vulnerability, weaker condo presale conditions, and continued economic uncertainty — could push more Ontario consumers back toward private financing, and the regulator says the sector isn't consistently meeting the standards meant to protect them when they do.
The scale of who's affected is real: FSRA's own consumer research found the share of mortgage consumers who identify as financially vulnerable has climbed from 22% to 39%. That's not a private-mortgage-specific number, but it's the backdrop against which the regulator is tightening its private-lending oversight specifically.
What FSRA's own file reviews turned up
FSRA has been examining private mortgage transactions directly, and the results point to a documentation problem more than a lending problem. In one round of reviews covering 101 private mortgage transactions, the regulator found that roughly 65% had suitability assessments and rationale that were missing, incomplete, or inconsistent — worse than the round before it. Every one of the files reviewed lacked a properly documented exit strategy.
That exit strategy is meant to be more than a formality. When a borrower takes on higher-cost financing because they don't currently qualify elsewhere, FSRA expects the brokerage to document how that borrower plans to get back to lower-cost financing once the term ends — and, separately, its consumer research found that vulnerable borrowers were more likely to report having discussed an exit strategy than the average consumer: about 60% of mortgage consumers overall said they'd had that conversation.
FSRA has also stepped up review of mortgage administrators, the firms that manage private mortgage funds and payments. Out of 266 licensed administrators reviewed, 12 were classified high-risk, with issues including trust-account deficiencies, co-mingled funds, and investor payments advanced before borrower payments were actually received. Those with the most serious findings now face remediation requirements or closer examination going forward.
What to ask before signing a private mortgage
None of this means private financing is the wrong choice for every situation it's used in. It means the paperwork matters as much as the terms, and a borrower is entitled to see both clearly before committing to anything. A few questions worth asking directly:
- What, specifically, is the exit strategy for moving to lower-cost financing once this term ends — and can I see it in writing, not just discussed verbally?
- Have I received the prescribed disclosure statement for this transaction, and do I understand every fee and cost in it?
- Why does this lender's underwriting work for my file when a traditional lender's didn't — is it income documentation, credit history, timeline, or something else?
- What happens if my circumstances haven't changed enough by the time this term ends to qualify for something less expensive?
A broker who can't answer the exit-strategy question clearly, in writing, is the clearest warning sign FSRA's own findings point to. It isn't about avoiding private mortgages altogether — it's about treating the exit plan as a real, documented part of the decision, not an afterthought to a fast approval.
Why this fits a "plan, not a product" approach
A private mortgage is sometimes genuinely the right tool — a bridge to a specific, known outcome, used on purpose rather than as a default. The regulator's findings are a reason to make sure whoever arranges it is thinking about your next move as carefully as your current one, with a documented path back to conventional financing rather than a hope that things improve on their own.
Nearly thirty years in Canadian financial services, based in Waterloo Region and working across Ontario. Most people are handed a product — you deserve a plan.
Figures cited are drawn from FSRA's published supervision plan, compliance findings and consumer research, and describe sector-wide aggregates, not any individual transaction. Everything here is general information only and subject to full qualification, lender approval and final terms.
Sources: Canadian Mortgage Trends — FSRA Flags Risks in Private Deals as Borrower Vulnerability Climbs · FSRA — Better Compliance Needed to Protect Consumers When Recommending Private Mortgages