OSFI, brokers recognize fraud risk

OSFI, brokers recognize fraud risk

OSFI, brokers recognize fraud risk Less than a week following fresh mortgage rule change announcements, OSFI is expressing its concern over inadvertent mortgage risk in the channel; for their part, many brokers are already doing what they can to avoid the issue.

“Just this week we had a client who provided documents, and we could tell the income had been, should we say, adjusted,” Len Lane, broker/owner of Verico Brokers for Life, told MortgageBrokerNews.ca. “It’s something we’re always aware of.”

And while brokers have set their sights on minimizing the risk of submitting inaccurate income documents, the issue is also on OSFI’s radar.

“It has come to light that institutions have been, I would say inadvertently, making mortgages to people whose income has been falsified,” Jeremy Rudin, superintendent of financial institutions for OSFI, told The Globe and Mail.  “One of things we’ve been doing is encouraging sound risk management.

“And as we set out in our guideline on mortgage underwriting, income verification – checking to make sure the borrower has the ability to carry the loan – is an important part of sound underwriting.”

For their part, many brokers verify income, themselves, before sending files to lenders.
“If it’s a smaller company, and especially if the letterhead looks fishy, we make calls to the company to verify,” he said, “even though the lenders don’t like us doing that.”

With that one particular client, Lane severed the business relationship.

“That file hadn’t been submitted to the lender, and there is really no real place to report things like that,” Lane said. “Lenders have become more diligent with their underwriting and they’ve started asking for more documents.”
  • Mal Eccles Secretary IMBA 2015-12-18 9:43:48 AM
    As Mr Lane points out, " where do we report suspicious, possible fraudulent activity?" Actually this should be reported to an Approved Investigative Authority. Some examples of AIA's are your local or provincial Police, CRA,( Informant Leads program), RECO, Appraisal Institute, our mortgage insurers ( fraud@CMHC.ca, fraudwatch@canadaguaranty.ca, stopfraud@genworth.com, or FINTRAC (see providing Voluntary Information)http://www.fintrac.gc.ca/
    As we the Brokers are the front line troops for Fraud it is our duty to now be on the look-out for illegal activities, as is mandated in the new Guidelines enacted by FSCO.
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  • Victor Simone 2015-12-18 9:49:05 AM
    One of the things that is challenging right now is verifying bank statements for clients that have "online account only". Many bank transaction records printed online do not have the client name, address, and account number on the print out.

    In most cases the confirmations of deposits requires the clients to go back to their bank "Competitor" and that is a deal killer sometimes. Sending your client into your competitor is just another chance for the bank to snatch your client business.

    Can't banks be told to include account holder details on their online printouts ? Surely, OSFI can make certain things easier for everyone.
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  • Len Lane 2015-12-18 10:28:17 AM
    Thanks for those possible AIA's Mal. Perhaps this should be an association focus for the training in the coming quarters. Its a gray area to accuse someone of fraud and could set yourself up for liable or defamation law suites so you should be 100% sure before you make those claims.
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