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.
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