An unlicensed mortgage broker accused of forging documents to help secure more than half a billion dollars in mortgages over the past decade is being ordered to stop his business immediately by the provincial regulator.
The regulator, the Acting Registrar of Mortgage Brokers, said in a cease-and-desist order issued last week that the office is also investigating more than 20 registered submortgage brokers and realtors that partnered with Jay Kanth Chaudhary.
Mr. Chaudhary’s actions raised concerns his unlicensed business could distort the housing market and, if allowed to continue, could put more lenders at risk, acting registrar Chris Carter said.
“This particular activity is of a size and scale that represents significant risk to the integrity of the real estate and the financial services marketplace.”
The order alleged Mr. Chaudhary brokered $511-million in mortgages after he had his licence suspended for forging clients’ tax documents in 2008 and then let his registration lapse. Over the past decade, Mr. Chaudhary – who also did business as Mike Kumar, George DeSouna and Jay Michaels – allegedly worked on 875 mortgages that made him $5.2-million in client fees and an additional $642,000 from referrals by registered submortgage brokers who submitted the applications to lenders on his behalf, according to the order.
“There were some reasonably sophisticated activities that took place to deliberately avoid detection, and that includes the use of pseudonyms, it includes multiple phone numbers and different e-mail addresses and companies,” Mr. Carter said.
The order alleges he produced falsified documents to inflate the income of clients and continued to do so even after investigators raided his office on Feb. 12 this year as part of a continuing investigation. The order does not identify who his clients were or explain their reasons for doing this, but it noted his alleged activity put borrowers at risk of being saddled with a mortgage they could not afford and put lenders into agreements they might not have otherwise made.
The registrar wrote in the order that he issued the directive because a comprehensive disciplinary hearing needed for Mr. Chaudhary “could not be realistically scheduled for at least nine months,” which would likely result in more of these mortgages being signed and lenders exposed to further risk.
Mr. Chaudhary could not be reached for comment last week, and his wife, a former realtor, directed The Globe and Mail to leave a voicemail asking for comment when contacted on her cellphone. There was no response.
Mr. Chaudhary can appeal the order to the provincial Financial Services Tribunal.
The investigation was sparked by a complaint from an unnamed source in the summer of 2017. The probe intensified the following spring after an employee at BlueShore Financial lodged another complaint to the registrar’s office providing details from an internal audit at the credit union that found problems with 15 mortgage files linked to a registered submortgage broker who appeared to be working with Mr. Chaudhary. Seven of these mortgages were insured by either Canada Mortgage and Housing Corporation or Genworth, the order stated.
Maureen Maloney, the lead author of a recent government-commissioned report into money laundering in the real estate sector, said there is not nearly enough oversight of unregulated mortgages. She said her team heard from some banks and credit unions that mortgages from these brokers could represent roughly 10 per cent of the market in B.C.
“Some of that could be completely legitimate, it could be parents buying their kids homes,” she said. “But clearly the number of unregulated mortgages has gone way up and that is a regulatory gap that needs to be fixed.”
Samantha Gale, chief executive officer of the B.C. arm of the Canadian Mortgage Brokers Association, said Mr. Chaudhary does not represent her industry and is urging a criminal prosecution of these allegations.