An unregistered Vancouver mortgage broker may have arranged over half a billion dollars in loans, many of which could be based on falsified income records, according to a cease and desist order issued by the Financial Institutions Commission (FICOM) May 30.
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Chris Carter, B.C.’s acting registrar of mortgage brokers, says the enforcement action should serve as a reminder to the public to check the FICOM website to ensure the broker they are dealing with is registered.
Still, unregistered broker Jay Kanth Chaudhary’s alleged illegal work between 2009 and 2018 was facilitated by registered brokers and licensed firms, Carter noted, and this should put the industry on notice, he said.
“The order makes reference to industry complicity,” said Carter, who leads one of many government agencies tasked to shore up regulatory oversight of Vancouver’s distorted real estate market.
One FICOM investigation, the order shows, indicates, “Mr.Chaudhary had a large network of registered submortgage brokers … as well as real estate licensees that he used to facilitate his unregistered mortgage broker activities.”
FICOM staff and Vancouver police entered undisclosed premises linked to Chaudhary in February, with warrants. They seized computers and documents related to his activities.
One spreadsheet summarized Chaudhary’s unregistered mortgage activities that involved at least 20 submortgage brokers and real estate licensees to whom he referred his borrowers.
The spreadsheet includes 875 files that generated $5.28 million in client fees and $642,344 referral fees “paid by the registered submortgage brokers who submitted the applications to lenders on his behalf,” noted the FICOM order released May 30.
In total, $511.6 million in loans is documented.
Chaudhary’s broker registration was suspended in 2008 for conducting business in a manner that was prejudicial to the public interest (failing to conduct due diligence). He never renewed his registration following the suspension, and went on to arrange mortgages through backchannels, according to evidence submitted by FICOM staff.
The allegations have not been presented to a hearing and Chaudhary has the right to appeal the cease and desist order, which was placed on him to immediately prevent further potential deals.
According to evidence outlined in the order, the Office of the Registrar of Mortgage Brokers received two complaints about Chaudhary in 2017.
Chaudhary may have falsified tax returns for his clients.
One complaint led to a review of 26 mortgages filed by broker CMLS Financial but submitted by a registered submortgage broker. FICOM staff determined 25 of the files included altered tax documents.
The same submortgage broker, referred to as “SB,” also filed 46 Chaudhary-referred mortgages with BlueShore Financial. Of those FICOM staff found 15 with discrepancies. Of those 15, seven were insured by either Canada Mortgage and Housing Corp. (CMHC) or Genworth.
SB was removed from CMLS and MCAP approved mortgage lists, according to FICOM.
According to communications discovered by FICOM between SB and Chaudhary, the latter may have been using the alias Mike Kumar. To avoid detection, a number of phone numbers and addresses were used by Chaudhary to conduct his business with registered brokers.
Carter said if Chaudhary disobeys the order he could face a fine of up to $100,000 and “potential” jail time.
Carter said there are multiple ongoing investigations related to the Chaudhary’s activities. He said he could not speak to any specifics, such as whether registered brokers and licensed agents and firms could face a hearing of their own.
