Most industry players agree the penalties for fraud are too soft, and one broker is proposing regulators target homeowners who knowingly sign inaccurate documents.
“Everybody talks about fraud – FSCO, CMHC, Genworth
, the lenders – but nobody does anything about it,” Ad Lakhanpal of Mortgage Alliance
told MortgageBrokerNews.ca. “My recommendation is that they shouldn’t go after the broker who signs the documents; (focus on) the borrower who signs off on the information saying it’s true.”
Lakhanpal believes this harsher stance would lower the level of fraud in the industry.
“If the information proves to be inaccurate, revoke the mortgage and give the client 30 days to find alternative financing,” he said. “If they don’t, they lose the home.”
While it’s a unique strategy, it’s one that likely won’t gain traction. Consumers can face prosecution by the courts if they are found guilty of committing fraud, but regulators have no power to police the public.
And industry players argue it’s the brokers who have to be punished, not the clients.
“I don’t agree because you’re punishing the clients and not the brokers; clients don’t really know the ramifications of signing falsified documents,” Ross Taylor of Mortgage Intelligence
Ross Taylor and Associates told MortgageBrokerNews.ca. “It seems easier to police ourselves than the clients because they don’t necessarily know what they are signing off on and most don’t study the documents.”
The suggestion was spurred by the latest incident involved a major lender and 45 brokers who allegedly falsified income documents.
Home Capital recently announced it had severed ties with those brokers after an investigation pointed to falsified information about borrowers’ income.
The contracts were suspended between September and March, but many in the industry argue a harsher stance needs to be taken.