How to Avoid Mortgage Fraud

Mortgage fraud has been a growing concern in the industry for several years.  Equifax stated that suspected fraudulent mortgage applications have increased by 52% in Canada since 2013.  

Rules and guidelines in the mortgage industry have become more complex leading to increased diligence among lenders and brokers.  

The mortgage stress test makes it more difficult for consumers to qualify for a mortgage loan.  And in today’s high-tech world, lenders and borrowers are not always meeting face-to-face.  

Increased pressure for some files to close quickly from consumers who expect quick transactions with minimal paperwork, can cause potential fraud.  

• Fraud to get shelter.  An individual commits fraud to get a mortgage on a home they could not otherwise obtain or afford. 
• Title Fraud.  The identity of a homeowner is assumed, and a new mortgage is taken out assuming the homeowner’s name and credit history but with loan proceeds going to the fraudster. The fraudster will use forged documents to transfer ownership and will use fake identification to get the mortgage on the property. 
• As part of other criminal activities.  A mortgage may be fraudulently obtained to get access to a home for illegal purposes. 

The general types of fraud that occur: 

• Fraud Involving Property.  Overvaluation of property; misrepresentation of property characteristics; builder bail-out scheme using a “straw” buyer. 
• Fraud Involving Employment Status.  Forged employment letter; forged or altered pay stub; inflated income; misrepresentation regarding self-employment 
• Identification Fraud.  Forged or altered ID, nonexistent individual 
• Equity Fraud (Down Payment). Bogus gift letter; bank account statements not the borrower’s 
• Title Fraud.  Fraudulent title transfer when the mortgage has not been paid in full; property not in name of the seller; identity theft relating to title fraud 

Fighting Fraud 

The real estate and mortgage industry can work together, along with consumers to reduce fraud.  To protect yourself and help avoid fraudulence, do the following.  

• Never discharge your mortgage, even when it’s fully paid off.  This will allow you to protect your title.   
• Always store personal information, including birth certificate, SIN, bank account numbers and credit card details, in a secure place. 
• Shred documents, such as credit card statements. 

• Never reply to spam or e-mails that ask for banking information, credit card details, passwords, or other sensitive information. 
• Safeguard your personal financial information. 
• Contact me first if you are having difficulty making your mortgage payments. 
• Consult your lawyer before giving another person a right to deal with your home or other assets. 
• Do a land title search with your provincial or territorial land registry office.  This search will show the name of the property owner and any mortgages or liens registered on the title. 

Another way to protect yourself is by inspecting your credit report annually.  You can do this by contacting Canada’s two credit-reporting agencies: Equifax Canada and TransUnion Canada.  

Mortgage fraud is very serious and harms the whole industry.  Fraud hurts people, not just companies or the government.  When lenders are defrauded, consumers are the ones who pay the price.  The losses that fraud causes can ultimately result in higher interest rates and fees for borrowers.  

I always stay up to date about mortgage fraud through training and constant learning.  I understand mortgage fraud, can recognize fraudulent schemes, and understand their consequences.  This allows me to protect myself, my business relationships, the industry, and most importantly my clients.