FSRA enforces new penalties, imposes two-year licence restrictions on agent and broker
The Financial Services Regulatory Authority of Ontario (FSRA) has finalized enforcement action against London‑area mortgage agent John (Johnny) Chehade, broker Rhett Richard (Richard Rhett) McClenaghan and 2078637 Ontario Inc., operating as Forest City Living, after a complex refinancing left a family struggling under high‑cost loans.
In minutes of settlement and a series of March 2026 orders, FSRA imposed a total of $34,000 in penalties and restricted both individuals’ licences for two years, capping a case that centred on falsified documentation, unlicensed lending and failures around mortgage suitability.
“The $1,000,000 one‑year mortgage on the property from the B lender was registered on May 2, 2022,” FSRA’s agreed facts said, noting that the borrowers previously held a lower‑rate bank mortgage before being advised to refinance and consolidate debt.
FSRA found that Chehade “submitted this gift letter to the B lender, knowing that the $40,000 was in reality a loan,” while a 14% promissory note from Forest City Living was secured against the borrowers’ home.
The regulator also recorded that he “did not conduct a proper suitability analysis” on the initial deal and relied on a one‑page “inadequate ‘Suitability Form’.”
A second‑position mortgage from Forest City Living, also at 14%, was later registered for $165,000, and a new $280,000 second mortgage at 12.75% followed when the first loan came due.
According to FSRA, “the borrowers were unable to make this new monthly payment” after rates rose and the new‑build purchase collapsed.
Under the settlement, Chehade agreed to pay an administrative penalty of $12,500, be downgraded to a level 1 mortgage agent and have his work “closely supervised by his principal broker” for two years.
McClenaghan, meanwhile, accepted a $4,000 penalty and a restriction to a mortgage agent level 2 licence for the same period, while Forest City Living agreed to a $17,500 penalty for carrying on business as an unlicensed mortgage lender.
FSRA has repeatedly flagged private and alternative mortgages as a focus area, warning that unreported second charges, conflicted gift letters and weak supervision can tip stretched households into distress.
The regulator recently moved to suspend the licences of two veteran brokers and shut down their Burlington brokerage over an alleged multi‑million‑dollar promissory note scheme.
Source CMP
By Liezel Once
