Former Home Capital brokers penalized by regulator
TORONTO — A financial services regulator said it disciplined two mortgage brokers who funnelled business to Home Capital Group, marking the first disclosure of action taken against dealers who submitted fraudulent loan applications to the embattled mortgage lender.
The Financial Services Commission of Ontario conducted its own review into Home Capital in relation to the company severing ties in 2015 with 45 brokers who used falsified client income on applications. The agency found that broker Gagandeep Duggal and agent Zaheer Mohammad weren’t complying with the rules, according to a spokesperson. Home Capital and the regulator hadn’t disclosed the names of any dealers sanctioned until now.
“FSCO takes allegations of fraud very seriously, and is committed to protecting consumers in the mortgage brokering sector,” said spokesperson Malon Edwards.
He said most of the brokers and agents that were part of its Home Capital review continue to be licensed. The level of proof is higher for a regulator to discipline a broker than for a company to cut ties with mortgage dealers, he added.
A Home Capital spokesperson declined to comment. Duggal didn’t respond to messages left with his firm, Mortgage Alliance, or to a voice-mail message left on a phone number associated with his name.
John Gabriel, director of compliance at the brokerage, said he “had no knowledge” of Duggal being charged by FSCO and that Duggal, who still works at the brokerage, was hired on Feb. 22, after the investigation took place. FSCO doesn’t provide the industry with historical employment of brokers, he said.
Mohammad was terminated from brokerage Mortgage Architects after FSCO released its findings last year, according to president Dong Lee.
Management didn’t provide his contact details and he didn’t respond to a LinkedIn message.
“We take fraud very seriously,” Lee said. “At the conclusion of the investigation, FSCO found no fault of Mortgage Architects.”
Home Capital’s stock has plunged by almost 60 per cent and it lost more than $3.5 billion in deposits after the Ontario Securities Commission last month accused the bank of misleading investors about its probe of the 45 outside brokers. The cash crunch has forced the company to take out an emergency credit line with a pension fund, and concerns about contagion from the lender have contributed to a slowdown in Toronto’s housing market.