Alleged 'shadow' mortgage broker's wife banned from industry in fallout from $500M case

British Columbia's registrar of mortgage brokers has disciplined the wife of a man, allegedly linked to half a billion dollars worth of questionable home financing, for allowing her husband to use her name to submit mortgage applications containing inflated banking and tax information.

In a consent order signed at the end of August, Mana Erfani was ordered to pay investigation costs of $15,000 and banned for life from applying to become a mortgage or sub-mortgage broker for facilitating the activities of Jay Kanth Chaudhary.

Chaudhary, an unregistered, so-called "shadow" mortgage broker, was ordered to cease and desist last year after an investigation which alleged that he collected fees of more than $6 million in transactions involving over 900 mortgage files.

Erfani, a former real estate agent who now runs a catering company, was registered as a sub-mortgage broker during the time covered in the order — from June 2015 to June 2017.

Chaudhary was last registered as a mortgage broker in 2008, when he was suspended for four months because of concerns about inconsistencies in documentation submitted to lenders.

'Demonstrably altered or not genuine'

According to the order, Erfani provided Chaudhary with passwords for her computer, email and a 'Filogix' account used to submit 20 mortgage applications to banks in her name.

The applicants all said they met with Chaudhary — not Erfani.

But the consent order claims Erfani's brokerage sent her the summaries of the transactions and the lenders sent her the commissions. None of the borrowers gave her money directly.

In one instance, an application said that a would-be home buyer had between $144,000 and $150,000 in their bank account when they actually had assets ranging from a debt of $16 to a balance of $8,000.

And in yet another application, a borrower's annual income was stated at $124,000 in a year when their notice of tax assessment said they actually lost $9,000.

"For each of the 18 borrowers and 20 mortgage applications, the income was either overstated, supporting documents were demonstrably altered or not genuine, or other information provided to lenders was false," the consent order says.

Erfani is the second person named in connection with Chaudhary's activities. 

Last October, the registrar of mortgage brokers announced a hearing into allegations against Shane Christopher Ballard, a sub-mortgage broker who was allowing Chaudhary to direct mortgage applications and submitting income, banking and employment information which he "knew or ought to have known" were not genuine.

Reached by phone on Monday, Ballard declined to comment. None of the allegations against him have been proven.

Erfani did not return a phone call requesting comment.

'They had stepped into a dream'

The case against Chaudhary is by far the biggest allegation of so-called "shadow brokering" announced by B.C.'s Financial Services Authority, the body which oversees mortgage brokers as well as credit unions, trust companies and pension plans.

Shadow brokering involves an unlicensed person acting to use the services of licensed brokers and sub-brokers as a front for their own activities.

Investigators obtained an order to enter Chaudhary's residence after receiving tips about his activities in 2017 and 2018. According to the cease and desist order, they seized laptops and phones containing more than 1,000 text messages "discussing mortgage broker applications, mortgage application status updates and sharing of mortgage documents."

The cease and desist order against Chaudhary claimed he used multiple email addresses, phone numbers and aliases to conduct business.

Deputy registrar of mortgage brokers Chris Charter told the CBC that investigations and enforcement actions associated with the Chaudarhy file are ongoing.

"The file really speaks to itself," Carter said. "The bottom line is when it comes to facilitating unregistered activity, brokers quite frankly, risk losing their licence if they're found to be supporting and facilitating that activity."

Earlier this year, the province put out a call for public consultation on a replacement for the Mortgage Brokers Act, which a 2018 expert panel on money laundering described as "antiquated." 

"Those using mortgages as a money laundering tool either directly or through currently unregulated lenders should be subject to regulatory action," the panel concluded.

Mana Erfani and Chaudhary married in January 2018, according to a magazine article celebrating their "epic" wedding at Fairmont's Hotel Vancouver.

According to the article, the pair met when Erfani was referred to Chaudhary for investment advice. The magazine devoted four pages to the ceremony, which saw Erfani enter a reception hall lit by 500 candles before approaching an 11-tier wedding cake.

"It was important for guests to feel like they had stepped into a dream, surrounded by soft light and exquisite royal details," Erfani was quoted as telling the magazine.

"The vision was to create a romantic, lavish garden inside the castle that is the Fairmont Hotel Vancouver. The combination of a modern fairytale ceremony with an elegant royal reception was perfect."