Yes, generally, it is illegal in Ontario for a private individual to regularly loan out mortgage money directly to the public without holding the appropriate license or being exempt from licensing requirements.

The Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA) is the key legislation in Ontario that governs mortgage activities. This Act stipulates that anyone carrying on the business of mortgage lending in Ontario must hold a brokerage license to operate legally, unless specifically exempt.

Key points from the MBLAA and related regulations:

· Licensing Requirement: The MBLAA requires individuals or entities involved in "mortgage lending" (lending money secured by real property or holding themselves out as doing so) to obtain a mortgage brokerage license from the Financial Services Regulatory Authority of Ontario (FSRA).

· Purpose: The MBLAA was established to protect consumers by ensuring that those involved in the mortgage industry adhere to ethical standards, disclose all relevant information (including fees, interest rates, and potential conflicts of interest), and are subject to regulatory oversight.

· Exemptions: There are specific exemptions to this licensing requirement, including those for certain financial institutions (such as banks, credit unions, and trust companies) and individuals operating exclusively through a licensed mortgage brokerage. However, these exemptions are narrowly defined.

· Consequences of Unlicensed Activity: As seen in the case of Flex Home Loans, operating as an unlicensed mortgage lender constitutes a serious breach of the Act and can result in significant penalties, including compliance orders, license revocation, and administrative penalties. Individuals can also face substantial fines and even imprisonment for offences.

In essence, if a private individual or company regularly lends money to members of the public in Ontario, secured by real estate, they are generally required to be licensed or operate under the umbrella of an authorized entity to ensure borrower protection and maintain the integrity of the financial system. The case of Flex Home Loans directly illustrates the consequences of bypassing these regulations.