Banks granted mortgages to Vancouver grow-op

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Two of Canada's biggest banks have been accused of being "wilfully blind" in giving huge mortgages to a Vancouver man who allegedly used the property as a marijuana grow operation, reported the Financial Post yesterday.

In this civil case before the B.C. Supreme Court, the Victoria-based Civil Forfeiture Office (CFO) is asking for full or partial forfeit of Bank of Montreal's and Royal Bank of Canada's interest in the mortgages on the million-dollar Vancouver home.

The writ filed by the CFO suggests the banks were aware that approving the mortgages would allow Hai Le to launder money through the property and their respective institutions.

"All or part of Mr. Le's income is derived from unauthorized production of cannabis marijuana," the writ claims. "BMO and RBC...had actual knowledge, were recklessly indifferent towards, or were wilfully blind to the fact that the approval of funding of the BMO Mortgage and RBC Mortgage permitted the...property to be used as an instrument to launder the proceeds of crime."

In August 2009, according to the writ, two days after Vancouver police raided Le's home and uncovered a massive marijuana grow-up, Le received a $70,000 mortgage from RBC for the property. Ten months prior to the raid, BMO refinanced Le's mortgage for $976,000 after buying the house for $980,000.

The writ claims that both times, Le couldn't prove a legitimate means of income to make the mortgage payments.

Both banks have filed statements denying all allegations, and the representing lawyers have refused to comment. 

  • Nancy M on 2010-06-16 5:24:24 AM

    Forgetting for a moment the value of the property, because something certainly doesn't sound right there, I have done many mortgages where legitimate clients had difficulty proving income, although none of them through BOM or RBC. They are done until the guidelines of each FI with equity considerations.

  • Bruce Hale on 2010-06-16 5:26:03 AM

    Wow what a coincidence, they are the only banks RBC and BMO that don't support the Mortgage Broker industry. I wonder if a mortgage broker could have helped flush out the fact that this was a grow-op to begin with? Hum...

  • AB Mortgage Broker on 2010-06-16 5:33:23 AM

    At the branch level, the reps approve crazy deals like this all the time. The only way they get caught is if something big like this happens or a surprise audit. Not all bank files are audited! Similarly, not all broker files are audited either. There are a lot of shady brokers who still manage to maintain their licenses and questionable underwriters with whom they connect.

  • mortgage needs on 2010-06-16 5:38:54 AM

    $265 plus gst. or thereabouts would have averted the problem altogether.
    A very small price to pay to ensure that a few hundred thousand to a couple of million dollar mortgage loan should be extended.

  • Vancouver Centre Broker on 2010-06-16 5:45:08 AM

    This story in the press, and the legal action behind it, shows the general lack of understanding by the public in how mortgage loans are approved. If every NIQ mortgage granted suggested negligence in the eyes of the courts for the purpose of Proceeds of Crime Legislation, you can bet that CMHC and other mortgage insurers would soon end the practice of providing mortgage insurance for them.

    Proceeds of Crime legislation is already sketchy in my books, as the burden of proof is similar to civil litigation rather than beyond a reasonable doubt as is the case in criminal law. The legislation simply invites abuse by the criminal justice system, and essential makes illegal a whole bunch of things that used to be considered human rights, such as privacy.

  • Mike the Mortgage Broker from Marmora on 2010-06-16 6:15:15 AM

    Where is a) OSFI, the Office of the Superintendent of Financial Institutions b) Cabinet Ministers in the Federal Government responsible for OSFI & CMHC?

    Majority of the time there is mortgage fraud or grow house it is because the deal is CMHC insured,and an appraiser has never walked/appraised the property.

    If I was the head hauncho of OSFI, & I wanted to keep my job, I'd put on my surgical gloves & start with a thorough "rectal exam" of both BMO & RBC's mortgage departments. Both entities seem to hire the same "quality" road reps & underwriters.

    .
    Ever had a bank road rep come into your office & say "Give me a call with any deals you can't place with a financial institution. You just charge the borrower a healthy fee & split it with me 50/50 & I will take care of gettting it approved in our bank"?
    ....I told him a)not to let the door hit his backside on the way out b) If he ever showed his face in my office again he would have difficulty recognizing himself in the mirror the next day.

    They must write Road Reps job descriptions as follows: "must be willfully visually impaired, with advanced skills in creative literature & a propensity to initiate solicitation & accept of unauthorized pecuniary inducements"

    Seems only little guys/gals like mortgage brokers get regulated/audited to death.Large FI's have their own rules

    How many of the properties involved in the BMO (there they are again)Frauds in Alberta were CMHC insured? I'd bet my mortgage broker's pension, it was at least 90%.

  • ab mtg broker on 2010-06-16 6:46:16 AM

    Just to let you know a lot of the bmo Alberta fraud mtg's were done by YES mortgage brokers which was from 2006 when they dealt with brokers. There is bad in the broker world as well, let's not kid ourselves

  • Reality on 2010-06-16 7:04:39 AM

    REAL appraisers need to be used. NIQ without a real arms- length appraiser or inspector involved allows this. Criminals can hide in plain sight without someone inspecting the property.

  • AB Mortgage Broker on 2010-06-16 7:32:00 AM

    I have a copy of the statement of claim for the bmo suit going on in Alberta. If you read the names, very few are brokers, but nonetheless you're right, it does happen in our backyard as well. It would be nice if RECA would get some balls and hang those found guilty. It would also be nice if the big brokerage houses would stop protecting those guilty of frad simply because of their volumes. No need to mention name, you know who you are!

  • andyjo on 2010-06-16 12:43:44 PM

    I use to work in the industry first as a banker for one of the named banks then I worked as a broker. With both institutions I was faced with an application from someone with criminal intentions. Both times, I had a "gut" feeling about the applications that something wasnt right, and in the case of one of them, I knew that the individual was a known drug dealer.
    I went to my superiors and advised them of my feelings. The one were I knew he was a dealer, I was told to proceed with the loan because of the family connections to the bank. The other situation I was told by the Regional Manager of the Mortgage Company that my job was to find my client a mortgage. As it turned out it was a fraud situation, someone who was using fraudulent ID to fraudulently refinance a home owned by absentee owners.
    I think that applications should maybe include criminal checks as well as credit checks. Plus a mortgage brokers best tool is their gut feeling.

  • mortgage needs on 2010-06-18 7:13:23 AM

    Surely that must show up in the records somewhere ? I forget where or is it only on Municipal records that is checked upon or show up at time of property listing ?Someone please advise. Thx.

  • mortgage needs on 2010-06-18 10:44:55 AM

    ..AND that it changed hands 2-3 times to associated or related parties, for more money each time and mortgage amounts increased each time to pay off the previous owner. Who knows but that it may not even have been listed by a realtor at each sale and/or gotten into MLS ?
    Seems like another item Lenders have to be careful with when extending on PRIVATE SALES, if the flips were indeed private sales.

  • mortgage needs on 2010-06-18 10:47:16 AM

    But then don't lenders require full Appraisal Reports if they are Private Sales ?
    Once again, if they were insured by CMHC it could have been a computerized appraisal ?

  • Richard Beauchamp on 2010-06-22 5:38:34 AM

    I'm very curious to know how the underwriter could have let this one slide. If he's self-employed, he would need the appropriate documentation to prove that he's making that income and also state a job title. I question the simple due diligence in this case on the part of the broker and the underwriter. Also, it would be curious to know what the condition of the house was before Mr. Le bought it and put mortgages down because if there was an appraisal made, it could have been done at the time of purchase, then the mortgage gotten simultaneously. At that point, they could move whatever equipment they would need and none the wiser.

  • Scott on 2010-06-16 2:21:20 AM

    Unfortunatley in this article what stands out to me most is the use of "allegedly" and "claims". I think before any strong opinions are made in regards to this matter more actual evidence and knowledge base is required. This is almost a what if they knew this man was gonna do this story. Which I dont believe the banks would knowlingly launder money for this sort of man, but hey who knows, its not like I have any Evidence to prove either way.

  • Joe on 2010-06-16 4:59:54 AM

    "The writ claims that both times, Le couldn't prove a legitimate means of income to make the mortgage payments"

    Can you not think that the writer has to say "claim" as not to be sued. The writer himself/herself doesn't have privy to actual filings/evidence.

    Since the case is filed, the banks/broker will have to show they had evidence of 'proper' means of income to suppport the Mortgage. Work backwards to find out how much Mr Le has to obtain a mortgage at max 74% LTV.

  • mortgage needs on 2010-06-16 5:05:06 AM

    This reads like RBC's $70 k is a 2nd behind a BMO 1st. Am I reading this correctly ?
    Guess there was no appraisal report done or the appraisal was a drive-by ?

  • Eleanor on 2010-06-16 5:05:17 AM

    It's not the first time. Paying Friends have friends working in every industry and the banks are not excluded from this. And, no income proof? Just because a guy drives a BMW, he gets a million dollars mortgage! Pulling up with one of these without a job should be the first hint of a Marijuana Grow Op

  • mortgage needs on 2010-06-16 5:12:32 AM

    This could be the case that appraisers want to argue for the use of real people rather than computerized jobs; although drive-bys are also done by real people.
    Perhaps this could have been uncovered if the property was fully appraised, although we would not want to see our appraisers come up against any personal security issues.
    Large mortgages should really get full appraisals, and the insurers should want that too. No money saving here.

  • AB Mortgage Broker on 2010-06-16 5:21:47 AM

    This article doesn't surprise me one bit. As for the bankers involved, they don't care, it's the employer's ass on the line, not theirs. At the end of the day it's all about quantity not quality. As a broker, we all know how the big banks operate.

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