Mortgage fraud is on the rise: How you can help your clients
As a mortgage professional, you would not intentionally allow fraud of any kind on a mortgage application. How common could it be anyway? You’d be surprised, and more than ever, you should be on your guard against it.
There are many types of mortgage fraud, but these two types, in particular, appear to be on the rise in Canada—title fraud and mortgage for shelter fraud.
- Title fraud involves someone posing as the owner of a vacant home and then selling or remortgaging it, which results in a title transfer.
- Mortgage for shelter fraud happens when prospective home buyers falsify information or documents to help their mortgage application.
You play an essential role in protecting your clients from both types of fraud.
Title fraud
Title fraud is on the rise and usually starts with identity theft. The fraudsters have enough personal information to impersonate the homeowner, list the home with a real estate agent and make off with the sale proceeds.
As virtual real estate transactions become more common, so does this type of fraud. For homeowners, protecting their personal information is the best defence. For home buyers, dealing with legitimate mortgage and real estate professionals will decrease the likelihood of buying a home they’ll never own.
Recovering from this type of fraud is difficult but possible. It’s easier if the person has title insurance—something to discuss with your clients when purchasing a new home.
Mortgage for shelter fraud
These mortgage fraud cases probably don’t even register as illegal to many Canadians. After all, what’s a small exaggeration if it helps them break into an increasingly unaffordable housing market?
It’s natural for your clients to be concerned about qualifying for a mortgage. It’s also natural for them to want to present their financial situation in the best possible light. Where does this cross the line into fraud? This a good reminder that any falsified information may be considered mortgage for shelter fraud and is never recommended.
Read more: Know the 5 Cs of credit to accelerate a submission
How is mortgage fraud detected?
Any incorrect information, omissions of information and fabrication of documents constitute fraud, so it’s important to impress upon your clients that when they sign off on the truthfulness of their application, it’s a serious agreement.
Findings in a recent BNN Bloomberg and RATESDOTCA survey conducted by Leger indicate a sizable chunk of Canadians are willing to commit mortgage fraud to secure housing.
While most Canadians still believe it’s never okay to lie on a mortgage application, 17% think it’s acceptable to inflate one’s income on a mortgage application artificially. And 18% said it was acceptable to misrepresent elements of one’s employment.
Mortgage brokers play an important educational role, helping clients understand the seriousness of playing it straight with their mortgage application. You may find this becomes a requirement in some provinces. For example, the Financial Services Regulatory Authority of Ontario (FSRA) wants to see mortgage brokers and agents in the province required to strengthen document and identity verification.
How to report a suspected mortgage fraud.
If you suspect mortgage fraud being committed, please reach out to your local police. You can also submit an anonymous tip to Crime Stoppers (1-800-222-TIPS). Additional information can be found here.
Finding a mortgage in today’s market
As an alternative lender, Bridgewater Bank is your partner in finding mortgage solutions that work for your clients. Your clients don’t need to get creative with their paperwork because we’re experts in helping you put together a deal that works for their situation. Talk to our BDMs and underwriters to help navigate the best options for your clients.