As Canadians’ debt-to-income ratio continues to rise, will that lead homeowners to desperate measures?
Laura Martin - Chief operations officer and broker - Matrix Mortgage Global
“Household credit market debt topped $2 trillion this year. We are at a national high of $1.70 for every $1 of gross household income. Why? Canadians have a strong desire for homeownership and are experiencing a long-term period of low interest rates. This perfect storm has led to rising real estate values and thus record-breaking debt and mortgage volume.
Historically, lower rates correlate to more debt households can carry. The correlation between mortgage fraud incidents and household debt itself is a weak one; however, a sharp increase in rates could be a push factor in fraudulent income document manufacturing.”
Todd Fralic - Co-owner - Quantus Mortgage Solutions
“It’s quite true that household indebtedness is overly high for many Canadians, but that’s just one piece of the puzzle. Over the years, we’ve seen LTVs drop for refinances, amortization options shorten and sources of capital shrink. Now consumers face a qualifying rate that eliminates the option of refinancing for many.
Faced with all these obstacles, will some consumers consider fraud? Perhaps, but with all the extra layers of confirmation we have as an industry at our disposal – and continuing levels of professionalism in our channel – I don’t personally see a large spike in fraud because of this situation alone.”
Leo Ragusa - Co-owner/agent - The Mortgage Professionals
“I’m sure there is some link between increased indebtedness and an increase in attempted mortgage fraud. That said, I think that in the past several years, lenders have really shored up their defence against fraud by requiring more and diverse documentation, increased audit and verification, and removing any suspect brokers from being able to submit.
I would like to see more aggressive punishment from FSCO for those brokers who break the rules, and I would like to see OSFI and banks take more responsibility to penalize bank mortgage specialists who are participating in fraud.”