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In: Economics

Need urgent please ASAP Breathtaking': Fake mortgage broker case reveals widespread problems In a real estate...

Need urgent please ASAP
Breathtaking': Fake mortgage broker case reveals widespread problems
In a real estate market saturated with stories about money laundering, offshore conniving and even murder-related property depreciation — it's easy for allegations against one unlicensed mortgage broker to get lost in the fray.
After all, British Columbia is used to stunning examples of greed and deception.
But the activity outlined in last week's cease and desist order against Jay Kanth Chaudhary is something different entirely.
Not just because Chaudhary is accused of using fake financial documents to dupe lenders into giving out half a billion dollars worth of loans. But because an entire network of licensed professionals are being investigated for helping.
And because hundreds of customers were allegedly willing to turn a blind eye if it helped them get a mortgage.
"I guess to me what's remarkable is the widespread apparent — there's no word for it really other than 'corruption' — of licensed people," says Ron Usher, a professor

Source: CBC News Online, June 4, 2019: https://www.cbc.ca/news/canada/british-columbia/mortgage-fraud-real- estate-corruption-1.5160842
of property law at Simon Fraser University. ...
  
Read the news story above by clicking on the link above. Answer the following questions:
1. Explain what is happening in this news story. Give a brief summary.
2. What is wrong with the system used in this story to help people borrow money?
3. Accurate Information:
a. Is it true that the system of financial institutions must have accurate information
in order for the system to work?
b. Why does it matter that the institutions have accurate information?
4. Regulation
a. Is regulation of financial institutions still important in Canada?
b.Why or why not?

Solutions

Expert Solution

1. Money is being raised by the borrowers who would not have qualified for a mortgage loan. These people are desperate for a loan so they are raising money using fake documents. They are also able to pay off their loans and are not defaulting, but they are not disclosing from where the money is coming (i.e. the source of repayment).

2. Fake financial documents are used to raise money for people who do not fit the rule for getting a mortgage loan. These documents are passed by the system. Questions should have been raised at different stages, but were not raised. Maybe because of inefficiency or because of corruption.

3

a) Yes, accurate information is very important for the system to work. System is authorising the lending, so how can the system work woth accurate information.

b) If not, then these scams can repeat. So, solid accurate information is must to prove that the documents are fake at the source of it.

4

a) Regulation is very important.

b) Regulation will help to catch inefficiencies and corruption in the system.


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