Fraudsters getting smarter, better organized

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An industry expert is cautioning brokers on smarter, better-organized mortgage fraudsters, more professional than the familiar mom-and-pop operations that once challenged the industry.
“There are really clever people out there, and they will get by the smartest person,” says Jeremy Nicholls, the manager of fraud and investigations with Servus Credit Union in Alberta, arguing the best defence is good vetting and, even, better bookkeeping.
“Your due diligence processes, documentation” is key, he says “If you come under investigation as a broker for a mortgage fraud, you can show that you vetted that person with the same scrutiny that you vetted all of your clients. You can show it is standard practice.”
Nicholls has investigated mortgage fraud and taught brokers on how to ferret it out and then combat it in the application process; but for brokers hoping to avoid that phone call from investigators to start with, it can be as simple as asking a few questions of the prospective client.
“Identity is key, and clever questioning about their identity, asking for the reason why they want the loan,” Nicholls says.
One prevalent mortgage fraud is straw buyers, who are fronts for organizations and are unlikely to have a criminal record. They’re often desperate for cash and willing to sign their name to a fraudulent loan.
“A typical straw buyer story will have a guy paid $4,000 or $5,000 to stick his name on the application – usually someone with good credit, but who may be short on cash, or a friend of the person,” says Nicholls. “They may be straw buyers from Ontario buying in Alberta – you need to have the knowledge of all the identity documents that are out there.”
But sometimes identity documents can be so well forged that even an expert cannot tell which is or isn’t real.
Scott Dawson, a broker with Verico Paragon Pacific Mortgage, has seen his share of fraudulent paperwork.
“In my office, we’ve seen fraudulent pay stubs come through, and fraudulent notices of assessments,” says Dawson. “No one teaches us these things. A lot of time we’re not getting trained on what is a legitimate document. There are some that look very professional.”
That is when a broker needs to start asking questions – and lots of them.
“What is your intention with this property? Are you moving? Is this a rental for you, or will you be renting it out? Why are you going there? Detailed questions like these are going to flush out your straw buyers,” says Nicholls.
As for lenders, Nicholls sees a simple solution to eliminating a lot of mortgage fraud.
“If I could introduce one thing, it would be for the financial institutions to get together and talk about every transaction,” he says. “But that will never happen – that is a fantasy world.”
One of the tell-tale signs of potential fraud are multiple lenders handing out loans on the same day of registration for the same property.
“That is lenders not talking to one another,” he says.
These people run in groups, with a builder and a lawyer on the payroll, sometimes an appraiser.
  • Joan E. on 2013-03-27 7:53:43 AM

    "These people run in groups, with a builder and a lawyer on the payroll, sometimes an appraiser." And sometimes a mortgage broker... too often a mortgage broker.

  • Tomas on 2013-03-27 8:20:40 AM

    How about an electronic verification of Notice of Assesssment with CRA?

    The borrower signs a consent to cover off interested in this?

  • ON Consumer on 2013-03-27 8:51:41 AM

    I agree with your comments that much of the time the mortgage representative is involved. You wouldn't happen to be a lawyer Joan E.?

  • Derek Rowley on 2013-03-27 9:57:34 AM

    @Joan E

    You truly have a bad attitude about mortgage brokers. Must be nice to live in a glass house. Tell me where you house is so I can be the first in line with a brick.

  • Scott Dawson on 2013-03-27 11:21:55 AM

    If you're interested in seeing the whole interview with Jeremy Nicholls we had him on Canadian Mortgage Hangout last week. You can watch the video on Youtube:

  • ON Consumer on 2013-03-27 12:46:58 PM


    I have read a lot of your comments and feel you put the interests of your clients first which is nice to see. However RMA agents should clean up their own house prior to throwing any bricks.

  • Derek Rowley on 2013-03-27 1:24:05 PM

    @ON Consumer

    TRhank you for your comments and compliment. I am not throwing any bricks so to speak but I feel that If whoever is going to be so down on brokers, then that individual should at least step up to the plate and at least tell us who he or she is as far as a title or profession. Even a condemned man has the right to face his accusers.

    As for myself, I try to keep a positive perspective within the industry and my comment to Joan E was perhaps off track and to Joan E I offer my humble apology. Here I am "fighting" and I should be motivating and inspiring. I will be more careful in the future to practice what I preach.

    Thank you and all the best.

    Derek Rowley

  • Derek Rowley on 2013-03-27 2:42:05 PM

    To all readers and contributors

    MBN has been or rather is an awesome resource and I truly love reading the stories and the comments. But here is my dilema. I am failing in remaining as a neutral spectator so to speak and at times reading the comments is like watching Jerry Springer and before I know it, the gloves are off. This is not who I am and so I have made an educated decision to no longer toss myself into the combatant waves and to let you guys have all the fun.

    Rather, I will sit on the side-lines and wait for an opportunity to oresent itself and then I will attack with words of wisdom through motivation and inspiration. This is who I really am.

    One word of advice - it is not a smart move to point fingers at brokerages and especially if the comment is deflamatory. Choose your words carefully and makes sure youir brain is in gear before your mouth goes into action. Remember the old saying; "United we stand - divided we fall".

    My sincere best wishes to all in your quest as an agent, broker, road rep, lender or whatever role you play. We all have one common denominator and that is to help our clients and to help and support each other.

    Best wishes and continued good selling


    Derek Rowley

  • ON Consumer on 2013-03-27 3:55:34 PM

    I think your right that this forum is for positive and motivation.

    I actually quite enjoy reading your posts since you put the client first and at the end of the day your right that bickering doesn't help anyone.

    I would like to correct your advice about pointing fingers at brokerages in that the statement must be false to be classified as defamation.

    A statement may hurt your reputation, but if it is true, anyone who says it has a valid defence for defamation. I made the comments specifically about the brokerage as this news thread directly relates to mortgage fraudsters.

  • Derek Rowley on 2013-03-27 5:07:45 PM

    @ON Consumer

    Thank you for you comments and comnopliment and your comment is received by myself in a positive tone.

    Here is some food for thought for all my brothers and sisters. Hiope you enjoy.

    One of Life's Greatest Rules..."You cannot hold a torch to light another's path without brightening your own".

    Best wishes to all

    Derek Rowley

  • Jeremy Nicholls on 2013-03-29 11:06:28 AM

    There are a minority of bad eggs in every profession, every single one. Therefore the truly good and honest industry professionals need to stand up and get rid of them. The minority is ruining the reputations of the majority.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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