Alleged 'shadow' mortgage broker implicated in dozens of shady deals

B.C. financial authorities have identified a woman accused of acting as a 'shadow' mortgage broker by feeding altered tax documents to licensed professionals on behalf of dozens of people who wouldn't otherwise qualify for loans.

The province's acting registrar of mortgage brokers claims investigations into three brokers identified 44 files containing documents that were either completely fake or altered to misrepresent borrower incomes.

The probe has already resulted in one Surrey mortgage broker being barred from the profession for 10 years. Hearings are pending against two other licensed individuals.

And last month, the province's financial institutions commission (FICOM) announced a hearing into the actions of Vinita Devi Lal, the woman accused of acting as an an unregistered broker by "giving instructions and directions" to the brokers whose files raised concerns.

'It's a big unknown'

Although officials won't speculate on amounts, the fact dozens of mortgages in the Lower Mainland have been compromised means tens of millions of dollars are involved.

The case is one of the most significant the regulator has investigated into the practice of "shadow" brokering — where unregistered individuals direct deals fronted by licensed brokers. It exposes gaps in both the criminal prosecution of mortgage fraud, as well as the process for qualifying new mortgage brokers.

And at a time when the province is trying to determine the extent of money laundering in the real estate market, the allegations also raise questions about something as simple as the keeping of statistics to track mortgage fraud.

"Obviously, the mortgage broker industry does not welcome this kind of activity, but I think we've got a little bit of work to do in terms of making sure that mortgage brokers are better equipped to appreciate these risks," said Samantha Gale, chief executive officer of the Canadian Mortgage Brokers Association of British Columbia.

"Nobody is tracking this information, and it's a big unknown."

'Unique in recent memory'

FICOM has posted a series of enforcement actions related to the case, culminating in a notice of hearing for unregistered brokerage activity against Lal.

The citation against Lal involves 27 files handled by licensed mortgage brokers Ricky Kanwal and Prem Singh, as well as an unidentified number of files handled by Anil Kumar (A.K.) Singh.

"It would be fair to say that the size and scale of what we've identified is unique in recent memory," said Chris Carter, B.C.'s acting registrar of mortgage brokers.

"What we have been clear about with industry is that we don't tolerate fronting of applications from unregistered parties." 

Kanwal and Prem Singh still face hearings in relation to the allegations, but A.K. Singh has agreed to give up his licence for at least 10 years.

According to a set of agreed facts, he submitted 17 mortgage applications to lenders with misleading information which came from a third party who he believed to be a Realtor.

'She has lots of connections'

A.K. Singh told the CBC he had just obtained his broker licence when he started handling files for Lal. He said he only agreed to a consent order because he couldn't afford to fight.

He says he understands the need for due diligence but says many of the files also made it past bank compliance staff without triggering any warnings.

Kanwal could not be reached for comment, but Prem Singh said she is also likely to sign a consent agreement.

"We got all the documents from Vinita Lal," Singh said.

"She has lots of connections. She had some Realtors and then she was with a financial institution and she had lots of clients out there."

A lawyer for Lal declined comment on the case but said his client will respond to FICOM's allegations.

No means of tracking mortgage fraud

FICOM documents in A.K. Singh's case point to the histories of the borrowers and the scale of wage inflation.

A self-employed fish filleter with an annual salary of about $30,000 was turned into a fish trader earning $75,000 a year.

A part-time carpenter became a self-employed auto scavenger. The salary of a self-employed hairdresser was bumped up from $13,451 in 2011 to $60,201. A janitor's income leapt from $10,881 to $77,000.

A.K. Singh says he's bitter to see his career ruined, while the woman accused of feeding him altered documents faces little prospect of punishment beyond a fine.

The maximum penalty for unregistered mortgage brokering is $50,000.

Carter said the regulator also works with police. Singh said he has made a complaint to RCMP.

But queries about the prosecution of mortgage fraud in B.C. and Canada came up nearly empty.

A spokesperson for B.C. Crown counsel said the prosecution service doesn't have an automatic tracking of fraud offences based on the means by which the fraud was committed.

Call for improved training and communication

Gale, who worked for FICOM before heading the mortgage brokers association, said no one can say for certain how widespread mortgage fraud is in Canada. And she said cash-strapped police departments rarely investigate anything but the most egregious cases.

The Canada Mortgage and Housing Corporation told CBC government analysis suggests mortgage fraud is rare. But real estate industry experts have warned mortgage fraud is on the rise.

Gale says technology has made it difficult to tell the difference between authentic and fake documents.

Which is why the association supports a call from Canada Mortgage and Housing Corporation to give lenders direct access to Canada Revenue Agency documents.

"CRA is one of the few tax authorities in the Western world that doesn't permit it," Gale said.

At present, applicants can qualify to become a mortgage broker through a correspondence course.

Gale says her association would like to see the regulator mandate an in-person component to the training that involves education around documentation.