Mortgage Fraud on the Rise Image

Mortgage Fraud on the Rise


Mortgage fraud is once again in the news in Canada. Just today, Equifax announced that it has uncovered more than $400-million in mortgage fraud in Canada last year. Though $400-million value is still only a fraction of the $1 trillion in total residential mortgage credit currently outstanding in Canada, it’s a staggering number just the same and Equifax believes even that is only a small part of the fraud taking place in Canada’s real estate market.

Now the important questions. How can we stop the further growth of mortgage fraud? And, whose job is it to do so?

The Real Estate Council of Alberta (RECA) has, as part of its mandate, to protect against, investigate, detect and suppress mortgage fraud as it relates to the industry. But it’s naïve to think RECA can go it alone. The fact is, RECA doesn’t have the authority to govern or regulate the behaviour, fraudulent or otherwise, of lawyers, bankers, members of the general public, and any other individual not licensed under the Real Estate Act. While RECA holds its licensed industry professionals to the highest standards – particularly when it comes to fraudulent behaviour – it can do nothing to stop mortgage fraud outside the scope of the Real Estate Act and Rules.

Every bank or mortgage lender in Canada has the ability to conduct its own due diligence before advancing mortgage funds. Are they doing so? I think it’s safe to assume – based on what Equifax has uncovered –the required due diligence is not always occurring.

Sometimes mortgage fraud is perpetrated as a means of furthering other criminal activity, for example, buying properties to open marijuana growing operations, to trade drugs and launder money. But, according to Equifax, the bulk of mortgage swindling still involves ordinary people lying to obtain mortgages larger than their income can support.

So, what can licensed industry professionals do? Well, the fact is, individuals working in Alberta’s real estate brokerage and mortgage brokerages are on the frontline when it comes to the suppression of mortgage fraud. It is your responsibility as a licensed industry professional to ensure you do not become a participant – willing or otherwise – in any scheme to obtain mortgage funds through deceit.

Arm yourself with the knowledge and experience necessary to avoid, even unknowingly, participation in mortgage fraud. A good first step is to check out these lists of Mortgage Fraud Red Flags that RECA has put together. If in your work as a licensed industry professional you come across information that you suspect is false or misleading, contact the lender and advise them of your findings. If the people involved are other licensed industry professionals, report the results of your review to RECA. If you suspect fraudulent and/or other illegal behaviour, take it one step further and contact your local police and/or the RCMP.

Who do you think is most at fault for the current level of mortgage fraud in Canada?