A growing number of first-time buyers and Canadians without an existing mortgage are falsifying documents or submitting incorrect information
Overall rates of mortgage fraud are on the way down in Canada – but affordability challenges are seeing a rising number of first-time homebuyers falsify documents or supply misleading information, a growing concern for mortgage brokers and lenders across the country.
That uptick in application fraud is a trend Equifax Canada’s director of fraud consulting Cherolle Prince (pictured top) described as cause for agents and brokers to apply extra vigilance when reviewing documents.
“Consumers with no existing mortgage or potential first-time buyers and even new-to-Canada [borrowers] have had a slightly higher rate when it comes to application fraud at 0.31% compared to existing mortgage holders that are just around 0.19%,” she said during a presentation at the recent Canadian Alternative Mortgage Lenders Association (CAMLA) expo in Brampton. “So it’s something to watch.
“That information doesn’t tell you that an applicant is committing fraud but it’s a trend to look for and maybe something to say, ‘Let me take a closer look if there are other anomalies’ that you’re identifying in an application.”
While overall rates of mortgage fraud have nosedived by nearly 38% across the country, Prince described falsified financials and income statements as “major concerns” in application fraud, accounting for nearly 95% of cases of that type.
Pay stubs, employment letters, account statements and downpayment information remain the most commonly falsified documents, although tax slips are also increasingly prominent. “Fraudulent tax slips are something we’re watching because we’re starting to see a little bit more of those being flagged,” Prince said.
Economic headwinds likely to put upward pressure on mortgage fraud
What’s more, with a growing number of borrowers experiencing financial strain and mortgage delinquency rates creeping up, brokers should remain hypervigilant for fraud at renewal time, she added.
“We’re seeing delinquency rates increasing in Ontario and BC and we’re going to be seeing some higher payment shock,” she said. “So a lot of consumers whose mortgages are coming due over this next year into next year are coming off low rates, around 2%.
“Those individuals are going to be looking at an increase of probably 200, 300 basis points and with that are continued economic challenges. That’s likely to have an impact on what we’re going to see with the fraud market.”
BMO’s Robert Kavcic warns of deepening housing uncertainty in BC and Ontario, even as Canada’s consumer confidence ticks up post-election. Buyers remain cautious, awaiting rate cuts and fearing recession.https://t.co/iT1wb1B2YC
— Canadian Mortgage Professional Magazine (@CMPmagazine) May 13, 2025
The onus has always been on brokers and lenders to take proactive measures, particularly when it comes to higher-risk segments – but that’s doubly important now, with concrete steps required to make sure nothing wayward is getting over the line.
“You want to make sure you’re doing more due diligence as you’re verifying those financial documents. Review the applicant’s credit health and their credit history. Look for signs of stress and inconsistencies,” Prince said. “You also need to know who your customer is, to really understand their risk from a broad perspective.
“All fraud starts with an identity. It’s either real or fake, and how you approach it and how you’re going to detect those anomalies is going to depend on the type of fraud.”
Evolving identity fraud types keeping mortgage brokers on their toes
Identity fraud generally relates to identity theft – a fraudster stealing an individual’s credentials in order to commit fraud in their name, such as applying for loans in various industries and through separate financial institutions.
But synthetic identity theft is also increasingly prominent, involving the creation of a fabricated identity that’s only real on paper. Those fraud types can be difficult to track, with fraudsters often spending years building and fleshing out that identity before making an application that looks to be legitimate.
Younger consumers, who are more likely to spend more time online, tend to be targeted for their data to help create synthetic identities – and there’s an emerging trend with that fraud type that the mortgage industry should be attuned to.
“It’s always been more common in unsecured lending. Credit cards are very common,” Prince said. “However, we’ve seen a shift, and that shift has now moved to secured lending. We’re seeing that rise – that’s really the concern within the [mortgage] industry.”
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