Mortgage fraud an increasing threat

Industry experts believe continuing high prices are driving more consumers to commit mortgage fraud

Mortgage fraud an increasing threat
Recent data from Equifax highlights the growing problem of mortgage fraud in Canada – a study by the credit reporting agency found that the number of potentially dishonest mortgage applications has grown by 52% since 2013. And it seems the country’s white-hot real estate market is to blame: Many of the problematic applications came from Ontario and British Columbia, where soaring prices continue to squeeze the average consumer.

Identity theft and money laundering comprised most of the cases, but buyers also submitted falsified or tampered tax returns, bank statements and employment documents in order to qualify for larger mortgages.

“It could be investing in the market as a way to cleanse money,” said Tara Zecevic, vice-president of customer insight at Equifax. “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.’”

In a related online survey, Equifax discovered that 8% of Canadians had falsified information on their credit applications. Thirteen per cent believed it was okay to tell ‘little white lies’ on their mortgage applications, while 16% considered mortgage fraud a ‘victimless crime.’

“What ends up happening is consumers think, ‘I’m not really doing anybody any harm,’” Zecevic said, adding that Canada’s long-running affordability crisis is largely responsible for the trend. “I definitely think there is this fear of a continuous rise in the cost of homes, that homeownership is starting to become out of reach.”

Amid the spectacular growth rates of home prices and sales volume in Toronto, the CEO of the city’s real estate board warned that authorities need to rethink their approach to the affordability crisis.

Toronto Real Estate Board head John DiMichele noted that the federal and provincial governments’ focus on allaying demand should give way to policy solutions aimed at improving supply, especially since there will be no shortage of people wanting homes in a city with vibrant economic prospects.

In particular, a foreign buyer tax similar to the one implemented by the BC government in mid-2016 would lead to reduced supply, “because the number of investors looking to purchase and rent out a property could decline.” Such conditions might provoke “stronger price growth in neighbouring communities/regions without a tax,” DiMichele said.