The Financial Services Commission of Ontario (FSCO) lacks the expertise and knowledge needed to regulate syndicated mortgages, according to the province's former registrar under the Mortgage Brokers Act.

"They don't understand any of this," said Bill Vasiliou. "They don't even understand their legislation."

Syndicated mortgages are legal investments, where multiple investors lend money to a borrower for a mortgage on a property.

Vasiliou regulated mortgage brokers, brokerages and other financial institutions in Ontario for 16 years through the '80s and '90s. Since then mortgage regulation has become part of FSCO's mandate. Vasiliou now works as a certified fraud examiner.

"We closed down a lot of brokers," Vasiliou told CBC News. "There were about 1,300 brokers when I took over, and we brought them down to 395."

They don't understand this. They don't even understand their legislation. - Bill Vasiliou, former registrar under Mortgage Brokers Act

In an email, a spokesperson for FSCO said that the regulator conducts on-site examinations of mortgage brokerages and "actively monitors disciplinary action taken by other regulators or jurisdictions."

But a report commissioned by the province last year supports Vasiliou's views.

The panel members concluded that an effective regulator should hire people with expertise in the relevant area of regulation and "seek to prevent non-compliance rather than react after the fact."

'It's fraud'

On Monday CBC News reported that more than 120 Chinese investors in the Greater Toronto Area were set to lose nearly $9 million in syndicated mortgage investments with Black Bear Homes, a developer in Fort Erie, Ont. Most of the projects involved renovating or building houses or townhomes in the Crystal Beach community on Lake Erie.

Vasiliou examined the syndicated mortgage contracts and ledgers for Black Bear investments and, in his opinion, he said, "This is open fraud."

In an email, Black Bear Homes representative Gary Fraser told CBC News he was doubtful an expert would consider the investments fraud.

Many investors went on tours of Black Bear Homes properties under development in Crystal Beach, Ont.

But according to documents obtained by CBC News, investors in syndicated mortgages with Black Bear Homes were led to provide a mortgage for more than the investment properties were worth. They were given their interest payments back from their own capital until the money ran out.

'They only go after the small guy'

Vasiliou said borrowers like Black Bear didn't create this model, but learned it from someone else and "created their own venue for it." In Vasiliou's opinion, investors will continue to lose money because FSCO is "leaving the parent company that started all of this intact."

"They only go after the small guy," said Vasiliou. "There's not any big guys they've gone after."

All of the investors CBC News spoke to have reported Black Bear Homes to FSCO.

The regulator has received 183 complaints about syndicated mortgages since 2013. Last year there were 46 complaints, and so far it has already received 34 in 2017.

I think the government should do tighter regulations to protect people like us. - Ken Man, syndicated mortgage investor

CBC News could not confirm how many of these complaints resulted in investigations. FSCO says it can neither "confirm nor deny the existence of an investigation" in order "to maintain the integrity" of all its investigations.

"I think the government should do tighter regulations to protect people like us," said Ken Man, who invested $100,000 in one Black Bear project with his wife. Man intended to use the savings they invested to pay off their own mortgage, but now the money is likely lost.

Ken Man invested $100,000 in a Black Bear syndicated mortgage project with his wife. The investment was supposed to help toward paying off their own mortgage. (CBC)

"It looks like there's a really big grey area right now, that [investors] like us are not covered," said Man.

Ministry 'taking action'

In a statement, the Ministry of Finance says it is "committing to strengthening protection for investors" in Thursday's budget by "transferring regulatory oversight of syndicated mortgage investments from FSCO to the securities regulator over time."

In the meantime, the ministry says it is "taking action to establish investment limits" on syndicated mortgage products and that and FSCO will expand the information brokers have to share with investors so they're aware of potential risks.

Vasiliou, in turn, urges investors to do their homework.

"Ask for the disclosure document that the ministry provides," said Vasiliou. "Read the document first. Make sure you understand what's going to be presented to you … and if you have any doubt, don't sign, don't invest."