Widespread mortgage fraud helps people buy homes - agent

Widespread mortgage fraud helps people buy homes - agent

Widespread mortgage fraud helps people buy homes - agent

Amid the continuously rising home prices in Canada’s most overheated cities, steady sales numbers reveal a market that remains capable of purchasing residential properties despite the affordability hurdles.

Relatively static incomes in the past few decades preclude the fact that most of the consumer base has become richer over time, which has led to Dominion Lending Centres mortgage broker Scott Nazareth proposing a more insidious alternative explanation: a sharp rise in the popularity of mortgage fraud.

Nazareth noted that the actual incidence of mortgage fraud in Canada today should be higher than what official figures say, up to as much as 20 per cent of Canadians.

“Many people may not consider ‘fraud’ the word to use for a ‘white lie’ for omissions of information to their broker or bank,” Nazareth said, as quoted by Better Dwelling, “[but] they may be surprised to note that any wrong information on their mortgage application is considered fraud.”

Nazareth added that in the mad rush to purchase homes in a market characterized by ever-dwindling supply, roughly 1 out of 5 Canadians “strategically try to withhold information or inflate their income through various means.”

Many of those who tend to go for these strategies are non-regular workers, the agent explained.

“Mortgages require at least a 2-year tenure in their job, and usually up to 3-4 years industry tenure for a bank/credit union to consider their income as part of a mortgage qualification… This hurdle or relative difficulty posed by CMHC/Genworth/Canada Guaranty and Financial Institutions themselves motivate borrowers to try and omit important employment details,” Nazareth stated.

In mid-January, Equifax Inc. said that instances of mortgage fraud in Canada have grown along with the runaway prices in the country’s hottest real estate markets.

The credit reporting agency stated that the number of potentially dishonest mortgage applications has increased by 52 per cent since 2013. Many of these flagged applications have originated from Ontario and British Columbia, both of which play host to Canada’s most expensive housing markets.

“It could be investing in the market as a way to cleanse money. It could be: ‘I really want that home and I’m getting into a bidding war and even though I make $60,000, I’m going to say that I make $90, 000,’” Equifax vice-president of customer insight Tara Zecevic wrote in the report.


 

Related stories:
Vancouver real estate developer committed fraud, securities panel finds
Fourth syndicated mortgage claim filed

13 Comments
  • Anne 2017-02-21 9:22:40 AM
    I'm extremely surprised this article made it in to mortgagebrokernews.....
    Post a reply
  • Rick 2017-02-21 10:20:16 AM
    On the bright side this is another reason to reach out to you prospects and data bases! 1. Set the record straight on tenure (minimum can be 3 months, talk to your lender) 2. Potentially dishonest are the key words there, brokers pull one bureau and shop it which reduces input errors and oversights on applications. Different lenders use different incomes which could also be a factor and we know what lender will accept what income instead of borrowers having to shop around themselves.

    Lastly, what was the original percentage of potentially dishonest applications? Saying it's up by 52 percent doesn't show the whole picture.
    Post a reply
  • Julie Stamp 2017-02-21 10:39:39 AM
    I am not surprised it made it into Mortgage Broker News what I am surprised at is the random figure of 20% that was used. Does Mr. Nazareth have facts and figures to support this claim? His article seems to be implying that clients can state what income they would like to have to purchase their homes, and while this would clearly be a temptation if this is what lenders accepted, that is not the case. Lenders require numerous checks and balances to confirm income. Standard requirements are current job letter that is verbally confirmed by the lender with the employer, current pay stub and last years Notice of Assessment. These are minimum document requirements for confirming income. In point of fact we are sometimes buried in the amount of confirming paperwork that is required to be provided to our lenders, say vs. the bank branches who somehow are still able to slide marginal deals through. Clients cannot just state what they would wish to have as income, contrary to what his article seems to be implying. All industry changes should be based on provable actual facts and data, and I would suggest if Mr. Nazareth is experiencing a 20% fraud rate with his clients then perhaps he needs to source a better pool of clientele, as I completely disagree with his statement and find no facts or figures to support his claim. Our industry and business is being squeezed enough both by the big banks and the government who fails to understand the business and makes multiple arbitrary changes to the regulations without waiting for them to effect the market and without enough consultation with that market to understand the full ramifications of those changes. We do not need our own team inciting inflammatory and inaccurate statements.
    Post a reply