Mortgage Fraud is the act of misrepresenting or omitting material information on a mortgage application to get a larger mortgage loan. Equifax indicates that there is a rise in high-risk and suspected fraudulent mortgage activity. They note a 52% increase in suspected fraudulent mortgage applications since 2013.
Lenders are seeing more and more Falsified Bank Account Statements’ and ‘Falsified Income Documents’. These were also were the most prominent application flags that was reported by Equifax. The two provinces that were flagged the most were Ontario, with 67% and B.C. with 12%.
The fear of missing out
Due to higher property values coupled with recent changes in borrowing rules, home buyers think the dream of home ownership is harder. This could be a factor in the spike in mortgage fraud. Mortgage rules mandates that borrower with less than a 20% down payment qualify for a mortgage at rate of 5.34% and a 25-year amortization. If a borrower is putting 20% or more down they must qualify at the contract rate plus 2%.
A recent survey indicates that one-in-five Canadians, who do not have a mortgage, indicated they are nervous they will never own a home because of rising prices and want to buy a home but can’t because of the down payment or income.
In a 2017 report Equifax stated that:
We have a relationship with over 60 lenders and we are able to negotiate the lowest rate that your credit will get. With only one pull of your credit bureau we are able to send your mortgage application to the lender that will approve your mortgage and advance your mortgage loan.
Whether you are looking for a fixed rate mortgage or a variable rate mortgage, a HELOC or a Home Equity Loan, we have many options that you wont get from a bank or a bank’s mortgage specialist.
Our mortgage rates are lower for first time home buyers, self employed borrowers, people who are new to Canada and have little or no credit and for many people who have no credit at all. If you are looking to refinance your mortgage to consolidate debt, our rates will help you to get back on track to financial stability.
- 13 percent of Canadians indicated they felt it was okay to tell ‘a little white lie’ when applying for a mortgage to get the house they want.
- 16 percent said they believe mortgage fraud is a victimless crime.
- 8 percent admitted to misrepresenting the facts on a credit or loan application.
You may be committing mortgage fraud if:
- Creating, alt="sunlite mortgage"ering or falsifying pay stubs, letters of employment and other documents;
- Giving misleading or inflated information about your income or length of service in your job;
- Misrepresenting your job status: full/part-time, hourly/salaried, commission-based or self-employed;
- Backdating letters of employment;
- Not disclosing all existing debts;
- Misrepresenting or omitting details of the property in order to inflate the property value; and
- Lying about the purpose of the property (e.g. listing it as your primary residence when it’s intended for rental purposes).
Canada Mortgage and Housing Corporation (CMHC) conducted a research and compared incomes reported on mortgage applications to incomes reported with Canada Revenue Agency. They found that mortgage incomes are systematically higher than incomes reported to the CRA.
A buyer using fictitious documents to qualify for a mortgage in one thing, buying a property and becoming house poor is another. Without proper budgeting and understanding of the true cost of owning a home could make homeownership difficult. If you had to fudge the numbers to qualify you probably didn’t take all the other expenses into account. CMHC found that increases in house prices were linked to an increase in the incidence of “possible income misstatement.” They also found a correlation between this sort of fraud and higher default rates on mortgages and foreclosures.