Brokers react to investigation about mortgage fraud

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Mortgage fraud exists – and brokers will be the first to admit that – but it isn’t nearly as prevalent as some make it seem, according to industry professionals.

“One in 1,300 files contains an element of fraud, maybe, and even those aren’t going into foreclosure,” Dustan Woodhouse, a B.C.-based broker with Dominion Lending Centres, told MortgageBrokerNews.ca. “The media is going to take a story with an element of sensationalism in it and roll with it.”

Woodhouse was speaking in response to a Globe and Mail article entitled “How mortgage fraud is thriving in Canada’s hot market.”

The original Globe and Mail article has piqued the interest of brokers across the country. Many have commended writer Tamsin McMahon’s balanced reporting, which included mortgage brokers, bankers, and insurers, among others.

The article discusses a TD rep who willingly manipulated documents to get a mortgage approved for a client. The head of the provincial Financial Institutions Commission blamed TD and not the rep – pointing to immense pressure to cross-sell banking products.

It also mentions how certain clients fudge their own documents willingly, in the hopes to qualifying for mortgages. It’s a practice referred to as “soft fraud” or “fraud for shelter.”

And it’s something brokers have encountered.

“Does mortgage fraud exist? Of course – every industry has an element of fraud because human beings want to take shortcuts. Is it rampant? No,” Woodhouse said. “The key is to know your clients – my own business is referral-based only, and I refuse to work with clients who say they Googled me.”

For his part, Chad Robinson, a broker with 360 Best Interest Mortgages Inc., believes tighter lending guidelines are influencing clients to submit fraudulent documents.

“As rules are tightening I believe we will see more of this type of fraud. It is important that as brokers and agents we look at all employment letters and paystubs,” Robinson said. “Pay particular attention to clients that have several inquiries on the bureau, sometimes they have learnt was not to say at the previous lender or broker.”

Robinson, himself, has had two instances of clients lying about job information on application documents.

Click here to access the original article.
  • Ron Butler on 2015-11-03 9:35:11 AM

    "I refuse to work with clients who say they Googled me" that is the most interesting thing I have heard from a professional salesperson in the last couple of months.

  • Dustan Woodhouse on 2015-11-03 9:58:56 AM

    To be clear re the 'one in thirteen hundred' comment, I was referencing the math of the one billion in suspect Hometrust mortgages reported on in the story in the context of a 1.3 trillion dollar market.

    Those files it is worth noting are also outperforming the non suspect files. A bit ironic, but also indicative of the 'fraud for shelter' angle.

    Another thing that keeps outright mortgage fraud low is that whoever signs on the dotted line is signing a full recourse loan. Unlike in the US where in most states a home owner can toss the keys to the bank and walk away, in Canada a mortgage lender will follow the person in default to the ends of the earth and garnishee wages.

    This is a large part of why forclosures in Canada are as low as they are. 0.21% currently, down from a high of 0.43% or so in 2009.

  • Steve on 2015-11-03 10:09:30 AM

    Whats a TD guy doing sending deals to Scotia?
    Why is TD largely at fault for their employee creating fake job letter?
    The poor client was suspended from her job! What did TD or this guy do for the poor client?
    and FICOM... where is the bar on performance expectations?

  • Dawn S on 2015-11-03 11:54:55 AM

    I thought the same thing Steve. We need a Broker disciplinary panel and if this came across such a panel- I bet he would not be accepted as a Broker in BC if it was left to industry professionals. Interesting enough, I had a call recently from a client that admitted that a TD Specialist placed her file with Scotia Bank as well, she did not have a job and wanted me to help her as she did not feel right about the transaction or the 3% Broker fee. My response was no Thanks. Maybe FICOM should be putting their resources into why a TD unlicensed Specialist is Broker files - hiding behind an inhouse Broker at TD.

  • Paul Hudson on 2015-11-03 12:13:58 PM

    @Steve. Agreed. The TD rep sending the deal to BNS doesn't make a whole lot of sense. Either poor reporting by the Globe or the rep was working off the record with a broker/Scotia rep and that wasn't mentioned in the article. FICOM going after TD instead of the rep doesn't make a lot of sense either (at least the way the story is presented in the newspaper). I certainly feel for the client if the story played out the way the Globe describes. @Ron Butler, I hear you, As much as repeat clients are gold in our world, I can't imagine why a business (of any kind) would turn away internet inquiries in this day an age; missed opportunities taking that approach. Ahhh...sensationalism in the media certainly helps sell advertising! The story could make a good sequel to Dirty Rotten Scoundrels!!

  • Shubha Dasgupta on 2015-11-03 2:10:29 PM

    I’d like to begin by saying that I’ve heard Dustin speak and hold him in high regard for all he’s been able to accomplish in this industry.

    That said, I must respectfully disagree with this article. Fraud, often referred to as a victimless crime has many victims. The credibility of the industry, our peers, the banking system, the lenders and underwriters, the professional associations and ultimately a vast unseen impact on the real estate market itself. We all know that stats are based on confirmed cases, many of us also believe there are many more cases that go undetected but still have long term repercussions. Let’s use Lance Armstrong and the long term effect he’s had on the cycling industry, think about all those that continued on a different path because of his “fraud”, all the sponsorship dollars wasted, those that never received their due credit etc. Fraud creates an uneven playing field and we should all care about that.

    As stated, it is correct that fraud will be present in all industry but the question that should be had is not “what is the level of fraud and what effect has it had” but rather “how do we deter and ultimately eradicate the need for fraud in the mortgage industry?” (All channels whether banking or broker).

    Training, education, barrier of entry, consequences are all starting points for this conversation but rest assured this is a conversation we need to see as opposed to defence of how little there is and the default rate on those cases. Instead of sweeping the issue under the rug why not bring it to the forefront as being a problem that is prevalent.

    At the end of the day It's up to us to make sure we carry ourselves with the highest level of integrity in all that we do but let’s begin to set the bar higher. Remember that wether true or not, the publics perception remains until we take a stand and address the issue.

  • ProBC Broker on 2015-11-03 2:33:28 PM

    Why did the BC Registrar of Mortgage Brokers, Carolyn Rogers, issue this guy a license? Am I reading this correctly? He committed fraud and you allow him to become a mortgage broker! Is FICOM trying to populate our industry with bad apples so it sours our credibility.

  • Google on 2015-11-03 2:58:41 PM

    I'm a good guy. If I refer you a client, please at least speak with them. :)
    Bing on the other hand.....

  • Dan on 2015-11-03 3:22:04 PM

    ProBC Broker - another good question may be "who the heck would let this guy join their firm??!!"

  • David on 2015-11-03 3:52:23 PM

    @Dusta. Foreclosures in Canada are not low because there is low mortgage fraud. They are low because prices have been increasing for 10, 15 years. Pointing to low foreclosure and default rates is missing the point. In a declining market, these rates will grow exponentially.

  • David on 2015-11-03 3:54:31 PM

    @Dustan. Sorry, I misread. You are saying foreclosures are low because of the recourse against borrowers. Anyway, my comment still stands, which is foreclosure rates are always low in an up-market.

  • George Christopoulos on 2015-11-03 5:23:47 PM

    There are still brokers out there charging clients to create false employment letters etc. We see it all the time.
    The lenders know who they are because they are not new brokers.
    Lenders need start cutting people off and prosecuting.
    And he claimed stress because he had to cross sell insurance ??? Are we in kindergarten or something ? What type of lame defense is that?
    FICOM allows this guy to get a license and they want fee disclosure also.
    The guy is crooked and will continue to be.
    There must be some good weed out there in BC.

  • Long Time Broker on 2015-11-03 6:04:57 PM

    I was constantly recruiting for agents and probably interviewed 50 over a matter of 6 months. These were existing agents and amazing how many wanted to know who was able to provide NOA's, salary letters and down payment because they had always been provided through their broker when needed. I no longer recruit. So there you go guys.

  • Wayne Campbell, Prince George on 2015-11-03 6:27:00 PM

    Let's be clear here; a TD rep is not a mortgage broker!

    They may be an employee of the TD bank, but they certainly are not a mortgage broker.

  • Henry on 2015-11-03 7:05:27 PM

    CIBC says in its adds that their mobile mortgage specialist can even qualify the penguins for mortgage. What kinds of message are they sending to the general public.
    If qualifying every body even penguins is not fraud therefore what is it.

  • Kevin on 2015-11-04 1:15:40 PM

    The story does not make sense as a whole. Firstly FICOM would not, and cannot go after TD - they are a federally chartered bank and FICOM has no jurisdiction over them what-so-ever. All they can do is report their findings to OSFI and/or the authorities. Secondly, FICOM would not have the access to the required information about the practices of a chartered bank… why? Because once again, FICOM has no jurisdiction or access to that information. As for some commentary regarding the lack of oversight for banks… do a direct comparison between the regulatory requirements that OSFI has in place with what the provincial regulators have. First thing you will notice, OSFI’s guidelines are more than twice the length – the second is that OSFI’s guidelines pertaining to customer disclosure, and treatment is far more robust.

    Brokers want to be on a level playing field with the banks? I say move the regulatory licensing and oversight for independent brokers to OSFI and the feds. Think we have it tough now? Let OSFI get there hands on the industry, then we will know tough.

    The comment made “I refuse to work with clients who say they Googled me” – that’s rich from a broker that is all over the place with an online presence and has in the past talked about using the internet to his advantage. How do you think someone finds you most of the time? They google you! To say that you refuse to work with clients that say that is how they found you… so what if they say “I found you online”, or I saw your Blog, or Facebook page, etc? How do you think they ran across that information? It would likely be a search engine. Do you turn away ALL customers who are not a direct referral? I challenge that notion and would wager that if confronted with proving it, you would not be able too.

    Lastly… Fraud IS an issue in the broker industry. To say that it is OK as long as they pay their bills is just a ridicules statement and is indicative of the experience of the person making the comment. There are longer term ramifications of falsifying documentation that nobody, include the globe, fail to consider. ANY broker who supports this activity in ANY shape of form should have their license immediately pulled at the minimum. A hefty fine should also be levied, and for more rampant issues – jail time. Saying that it is OK so long as they make their payments is akin to saying it is OK to steal from a store because nobody gets hurt, or the company already makes enough money. It’s no different than saying committing any crime is OK – as long as nobody gets hurt.

    This is about the moral compass of our industry, it is about ethics. Lying, under any guise, is not ethical – period. The fact that so many brokers are coming out in defense of the behavior is a clear indication of the low moral and ethical standards of far too many people in the broker industry. An industry that is obviously far too concerned about making money. For those of you who support this behavior… if you have or had children… would you condone them lying? Cheating on an exam? This is exactly what you are doing – teaching them that it is OK to lie. It’s frankly disgusting.

  • Paul Therien - CENTUM on 2015-11-04 1:35:36 PM

    To a degree I have to agree with the final paragraph of the commentary made by Kevin. At the end of the day, and regardless of what our competition does, we need to ask ourselves a simple question:

    To what moral standard do we want to be perceived as an industry?

    Yes, it may be true that there are few foreclosures, or delinquencies as a result of the activities being discussed, but...

    Do we want to establish a perception of being people who will go to all ends to get a deal done, including encouraging the falsification of documents or turning a blind eye to that activity?

    OR

    Do we want to be perceived as an industry of professionals that are ethical in their business practices?

    Volume, in my personal view, is not worth the degradation of our reputation as an industry.

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