'Elaborate scam' leaves seniors with high-interest mortgages they didn't want or understand
Some are fighting foreclosures in court, while another had to leave her home
Some seniors are at risk of losing their homes in a scheme involving door-to-door equipment rental contracts, questionable renovations and mortgages worth hundreds of thousands of dollars that many didn't know they had and can't afford, a Marketplace investigation has found.
Lawyers familiar with the situation say there are potentially hundreds of victims throughout Ontario — in what one called an "elaborate scam."
"These homeowners are at risk of homelessness and the loss of their life savings and the entire equity in their homes," said Graham Webb, the executive director of the Advocacy Centre for the Elderly (ACE), a legal aid clinic for low-income seniors in Ontario.
"I don't think that a week goes by where we don't get a call about one of these matters."
Each situation is unique, but many seem to follow a general pattern where homeowners — usually seniors — who have previously been duped into various door-to-door HVAC equipment rental contracts are again approached at their homes by people who say they can help the homeowner consolidate their debt.
In some cases, the homeowners are told they are eligible to receive money back if they buy more equipment or have renovations done on their homes. In reality, their home is used as collateral and they are allegedly tricked into signing mortgage papers that many say they did not understand.
Funds from the mortgage are deposited into the homeowners' bank accounts, then the same door-to-door people allegedly return, asking the homeowner to write cheques or money wires for those funds, telling them it's to cover the cost of the home renovations.
The mortgages are usually a one-year term with 25 per cent interest and monthly payments paid up front, which means that in many cases the homeowner does not know they have a mortgage until it comes due a year later.
WATCH | CBC Marketplace investigates 'elaborate' mortgage scam:
It remains unclear who is ultimately responsible for orchestrating the scheme province-wide or if there are multiple parties involved. The Ontario Provincial Police (OPP), through their Serious Fraud Office (SFO) and in collaboration with other police agencies, say they are investigating a similar-sounding scheme, but won't identify the companies or individuals under investigation.
In January, the SFO sent a statement to Marketplace, stating that the scheme is "complex and multijurisdictional, involving multiple individual complaints across the province."
A number of lending companies are named in lawsuits across Ontario with similar allegations. While not involved in every mortgage Marketplace reviewed, one lender came up consistently in the research — Canada's Choice Investments (CCI).
Marketplace found 40 CCI mortgages ranging from $100,000 to $550,000, each with 25 per cent interest, registered on properties in Ontario. In some cases, those mortgage loans are split with other private lenders, while other times they are owned solely by CCI.
Of those 40 mortgages, Marketplace producers tracked down over half of the homeowners, their family members or lawsuits filed on their behalf. All said they or their family members had not actively sought a mortgage, and while they don't know who orchestrated the scheme, many believe CCI is involved.
It starts with a knock at the door
Karl Hoffmann is one of those homeowners. In late 2022, he got a foreclosure letter saying he had two weeks to leave his home of over 50 years in Bowmanville, Ont.
"We had a lot of emotion.… I basically had to drop my life and move into his home to ensure that someone didn't come and take his home on him," said Melissa Irons, Hoffmann's daughter-in-law.
Hoffmann suffered a brain aneurysm nearly 40 years ago and struggles to make decisions.
The senior's late wife, Sylvia, took care of him until her death in 2020.
"Karl's a very kind of simple man," said Irons of the 79-year-old. "He just sits at home, watches TV … which he's quite content with."
Hoffmann says he didn't realize he had a new mortgage. Many of the steps leading to that foreclosure notice are still a mystery to his family, but court documents and property records fill in some gaps.
Starting in about 2017, records show Hoffmann and his wife had been signed up for several door-to-door rental contracts for home equipment including plumbing valves, a digital thermostat, water softeners and outdoor cameras that his family says he never knew how to use. Irons says Hoffmann also didn't need or actively seek out these items.
In Ontario, when rental equipment is attached to a home, the associated company can place a Notice of Security Interest (NOSI) or lien against the title of that property as a form of assurance that the contract will be paid. These liens stay attached to the property until the contracts come to an end or are paid off.
Property records show that there were 11 liens registered on Hoffmann's property by several different companies from 2017 to July 2021 worth a total of $103,478.66. One of those liens was for "plumbing valve upgrades and home surge protection equipment" worth $34,699.
High-interest mortgage
Unbeknownst to Irons and her family, records show that a one-year mortgage was registered on Hoffmann's property for $130,000 with 25 per cent interest four days after the plumbing valve and surge protector equipment lien was placed on Hoffmann's home.
"The rate of interest is astronomical. We have never seen an interest rate that high," said Greg Weedon, a lawyer hired by the family to fight the foreclosure.
He says the people behind the scheme are basically bundling up liens into a high-interest mortgage.
"The same people show up and say, 'We can help you consolidate your debt and we can help you take these monthly payments down to a single payment and you'll be able to get out of this debt by way of a mortgage,'" he said.
Private lenders allegedly involved in the scheme
The sole director of the company that applied the plumbing valve and surge protector equipment lien, Canada's Choice Capital (CCC), is Anas Ayyoub.
He also runs CCI, the company behind not only Hoffmann's $130,000 mortgage but also 40 other mortgages Marketplace found records for with 25 per cent interest.
About $40,000 of Hoffmann's mortgage was allocated to pay out that lien.
"It gives the appearance that there is some sort of scheme being orchestrated by the CCC parties," said Weedon.
In a statement emailed by its lawyer, CCI said it is "an honest business and operates with integrity and in compliance with all applicable laws and regulations."
The CCC lien was still attached to Hoffmann's property until Marketplace questioned CCI about it earlier this month. The company responded via email saying that it was an "oversight" and sent proof that its lawyers had removed the lien from Hoffmann's property.
Mortgage money goes in and comes back out
After payments including lawyers' and brokerage fees, and the CCC lien, documents show Hoffmann received $37,944.23 from the mortgage.
Then, two days after those funds were transferred into his account, records show the senior wrote a cheque for nearly the same amount of money to another company that the family alleges in their lawsuit is connected to the scheme.
In the end, after fees and debts were paid, Hoffman only received about $350 from the $130,000 mortgage, Weedon alleges.
Unbeknownst to Hoffmann or his family, his one-year mortgage was ultimately sold to another private lender, which is the company that sent the foreclosure notice after the mortgage came due and payments were not made.
Not the only one
Irons and her family are not alone.
Other seniors caught up in the scheme include Danila Lim, an 88-year-old legally blind woman who, along with her son, a retired Canadian Armed Forces officer with PTSD, ended up with a $500,000 mortgage they didn't want or know she had. Lim, along with her family, is now suing many of the alleged parties involved in the mortgage transaction.
Marlene Hamilton, a 69-year old widow whose family says she cannot read or write, ended up with a $150,000 mortgage and ultimately lost her home in Port Hope, Ont., where she'd lived for over 40 years.
"We were both crying," said Hamilton's daughter, Lisa Amos, when remembering the day they left her mother's house for the last time. "It was hard. Really hard."
In multiple statements of defence, CCI said that mortgages were signed voluntarily. In a statement to CBC, it said that a law firm it used advised the company that its loans were "lawful and compliant with applicable law."
The company also said that it may be a victim of a concerted group of seniors who are refusing to pay back their loans and that it is co-operating with law enforcement in its investigations.
CCI says it relies on the legal certifications it received from the borrowers' lawyers stating that borrowers understood that they were borrowing money and on what terms. It also said that it does not solicit loans from borrowers and that clients were referred by mortgage brokers.
Questions about legal advice, brokers' duties
Hoffmann's and Lim's current lawyers question how mortgages like these could get past a mortgage broker and lawyer.
In Ontario, when a mortgage transaction takes place with a value above $75,000, both the lender and the borrower must have separate lawyers.
Of the mortgages Marketplace researched, not all went through the same lawyer but in both Hoffmann's and Lim's cases, records show that the lawyer representing the seniors' side of the mortgage transactions was Mississauga-based Anant Jain and his firm, Anant Jain Law Professional Corporation.
Both families are suing, and in their statements they argue Jain didn't provide proper independent legal advice.
In Hoffmann's case, his statement of claim alleges that CCI and other parties introduced Jain to Hoffmann to create a "veneer of legitimacy they knew it did not have." It also states Hoffmann didn't want a mortgage and didn't understand the mortgage.
In a statement, CCI said that the lawyer has no connection to the company and was referred by the mortgage broker.
"It's pretty clear that if you're signing a 25 per cent mortgage loan against your property … there would be some material questions that a lawyer would ask," said Weedon. "In this case, that wasn't done."
Marketplace is aware of two additional seniors with CCI mortgages with 25 per cent interest who were also represented by Jain and his firm who have named Jain in their lawsuits. All allege professional negligence.
In his statements of defence, Jain denies wrongdoing, saying his clients understood the documents, and that he acted diligently and in good faith.
Marketplace reached out to Jain for an interview, but his lawyer responded saying they are unable to comment on cases currently before the courts.
While not listed on every mortgage Marketplace reviewed, documents show that in Hoffmann's, Lim's and Hamilton's cases, there was a common mortgage brokerage involved, Centum Mortgage Smart Inc., whose registered head office was listed in Brampton, Ont.
WATCH | Ontario Provincial Police investigate mortgage scam:
Mortgage brokers have a duty to find the most suitable mortgage for their clients, as outlined in the Mortgage Brokerages, Lenders and Administrators Act of Ontario.
"The responsibility is to find a product that matches the borrower's needs," said Maurice Pilon, a lawyer hired by Lim's family to fight her case in court.
Both Hoffman and Lim are suing, saying Centum Mortgage Smart Inc. failed in its duties.
Hoffmann's lawsuit alleges that the brokerage worked "in concert" with the other players to facilitate the mortgage transaction.
In legal filings, Centum Mortgage Smart Inc. says it is not involved in door-to-door sales.
In an email statement to Marketplace, the company's principal broker, Kamal Dhillon, said that the brokerage is not involved in any fraud and that the mortgage deals were closed by prominent law firms where full disclosure about the mortgages was made to clients "multiple times about the details of the mortgage."
Dhillon also said that "clients chose to consolidate existing high-rate debts with these mortgages," and that the clients were considered high-risk and a private mortgage was the only option.
The Financial Services Regulatory Authority of Ontario (FSRA), an independent regulatory agency that oversees mortgage brokers, said in an email statement that it is "currently reviewing concerns about the conduct of individuals that are sponsored by [Centum Mortgage Smart Inc.]."
Marketplace reached out to Centum Financial Group to ask whether the national mortgage network was aware of the allegations against its licensee, Centum Mortgage Smart Inc. Its president said in an email that Centum licensees are independently owned and operated by a licensed broker. He said the company is "deeply concerned" about the situation and is "terminating" its relationship with the brokerage. He also noted that each office is a private business with a licensed broker who has regulatory responsibilities in their province and who licenses the network's services and brand.
Advocacy centre wants ban on residential liens, some door-to-door sales
It's unclear who is ultimately behind this. There are many different companies such as other private lenders, mortgage brokerages, lawyers and individuals who knocked on seniors' doors named in lawsuits around Ontario with similar allegations.
Karen Steward, a staff litigation lawyer with ACE, says her organization started investigating this overall scheme after receiving phone calls about it in the summer of 2022.
ACE wants the provincial government to ban liens on residential properties, "given the rampant abuse of the system," Steward said in an email.
The organization also wants the government to all ban door-to-door sales of products and services exceeding $50.
The Ontario government banned door-to-door sales of some household appliances including certain HVAC products in 2018, but it only pertains to certain services and there is no current dollar limit on services offered.
In an email statement, Ontario's Ministry of Public and Business Service Delivery, the ministry responsible for regulating liens and door-to-door sales, said it takes matters of consumer protection "very seriously," and that it has already begun consultations on a comprehensive review of the Consumer Protection Act, which includes proposals on new and stronger protections for consumers, and consultations on issues relating to the use of NOSIs by businesses.
It also provided this link where Ontarians can check their property title to see if liens have been placed on their homes.
Tips to keep from falling victim to this scheme
The OPP's Serious Fraud Office wants the public to be aware of this scheme and provided Marketplace with some tips and red flags to be aware of.
ABOUT THE AUTHOR
With files from Nicole Brockbank and Matthew Pierce
