Most private mortgage pitches spend their time on the coupon. Very few explain what happens on the day the borrower stops paying. Over the past eighteen months Ontario has had plenty of examples of that day, and they deserve a closer look than the marketing does.

A string of court files, not a single blow-up

In May 2025 the Financial Services Regulatory Authority of Ontario (FSRA) went to court to have a receiver appointed over Sussman Mortgage Funding and two related companies. The receiver's first report described a book of 38 syndicated mortgages held by 92 investors, with roughly $101 million of principal outstanding and 11 loans already in arrears when the receiver arrived.[1][2] In March 2026 the Superior Court appointed a receiver over Equityline Mortgage Investment Corp. after defaults on debentures sold to investors.[3]

Pooled vehicles have struggled too. Romspen's flagship mortgage fund has been closed to redemptions since November 2022. In January the Globe and Mail reported that five large loans, each above $100 million, were in receivership or restructuring.[4]

None of these cases shows that private credit is broken. What they show is that private credit's protections are legal and operational. The contract, the security and the administrator decide what an investor gets back, and the yield has nothing to do with it.

What a receiver actually does

Once a court appoints a receiver, the administrator's authority over the loans passes to an officer of the court. From there the work is slow and procedural:

  • Inventory. The receiver rebuilds the loan book, often from incomplete records, confirming who holds which fractional interest in which mortgage.
  • Triage. Performing loans are serviced and collected. Defaulted loans move to enforcement through power of sale, refinancing or negotiated payouts.
  • Ranking. Recoveries are distributed according to the registered priority of each charge. A first mortgage on a finished building and a second charge behind a construction lender are completely different claims, even if both were sold as "real estate secured".
  • Costs. Receiver, legal and realization costs come off the top. Small or complex loans can lose a large share of their recoveries to process alone.

Time is the hidden cost. Receiverships are measured in years. For investors who were counting on monthly income, the loss of liquidity can hurt more than the eventual principal shortfall.

The questions worth asking before you lend

Ontario's framework separates qualified syndicated mortgages, which are simpler and lower-loan-to-value interests in residential property, from non-qualified ones. Since 2021 the non-qualified category has been subject to securities-style exemptions and enhanced disclosure.[5] That disclosure is only useful if investors read it with failure in mind. Five questions do most of the work:

  1. Where does my charge rank, and what sits ahead of it? Ask for the full registered priority, including any construction financing that can advance ahead of you.
  2. What is the loan-to-value on an "as is" basis today? An as-complete appraisal on a project that has not been built is a forecast, not security.
  3. Who administers the loan if the administrator disappears? Find out whether there is a trustee or a backup servicer, and how investor votes are run.
  4. What are the redemption terms in a pooled fund? Notice periods, gates and suspension powers tend to be used exactly when investors want out.
  5. Is the yield paying for real risk? A coupon several points above senior construction lending usually means a subordinate position, higher leverage or a borrower who could not get capital elsewhere.

Where this leaves Ontario housing credit

The receiverships are concentrated in development loans, subordinate charges and condominium projects that depended on presale closings. Debt secured on stabilized, income-producing rental buildings behaves differently. Borrowers there can service from rent, refinance into insured programs and sell into a liquid buyer pool. That is a structural difference, not a guarantee, and every loan still has to be underwritten on its own facts.

The lesson for Ontario investors is not to avoid private lending. It is to price it like a lender rather than a depositor. Yield is compensation for risk you have identified and accepted. In a receivership, documentation, priority and the quality of the underlying asset are what's left.

This article is general information, not investment advice. Investors should review offering documents and seek independent advice.

Sources

[1] Chief Executive Officer of FSRA v. Sussman Mortgage Funding Inc. et al., 2025 ONSC 2982: https://www.minicounsel.ca/scj/2025/2982

[2] First Report of B. Riley Farber Inc., Receiver of Sussman Mortgage Funding Inc.: https://www.airdberlis.com/docs/default-source/sussman/first-report---receiver---b-riley-farber-inc---02-jun-2025(64772964-1).pdf

[3] Lozovski v. Equityline Mortgage Investment Corp., 2026 ONSC 1611: https://www.minicounsel.ca/scj/2026/1611

[4] Romspen's redemption crisis exacerbated by 'large, complex' real estate loans, The Globe and Mail (Jan. 14, 2026): https://www.theglobeandmail.com/business/article-romspen-redemption-crisis-large-complex-real-estate-loans-investor/

[5] Better supervision and oversight needed for brokering and administering mortgage investments, FSRA: https://www.fsrao.ca/industry/mortgage-brokering/regulatory-framework/supervision/better-supervision-and-oversight-needed-brokering-and-administering-mortgage-investments