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Canada’s Biggest Mortgage Fraud

BMO-mortgage-fraud Canada’s largest-ever mortgage fraud unfolded in the press last week.

The fraud reportedly involved straw buyers who were paid up to $8,000 to buy properties for the alleged ringleaders. The accused perpetrators picked cheap homes in neighbourhoods of more expensive homes, used the surrounding home prices to grossly inflate subject property values, created forged documents to fake borrower income, and skipped town with the mortgage proceeds.

BMO is suing hundreds of people including its own employees, Realtors, over 18 lawyers, mortgage brokers, and an MP.

Details are scarce at the moment because BMO is restricted in commenting. There’s also an ongoing RCMP investigation.

An RCMP officer told CBC, “We have a number of issues. First of all, we have real estate agents to interview, mortgage brokers to interview, bankers to interview. And then we have a mortgage file to review — and it’s a huge documentary evidence file that we have to review and it can take years to investigate.”

BMO acknowledges that nothing has yet been proven and says no customers were directly affected.

“…This experience has provided some learning that we have applied to further enhance our due diligence,” said a BMO spokesman.

No doubt.

Other lenders’ risk management departments are also likely reviewing their underwriting and closing policies.


One practice this fraud puts under the microscope is that of automated computerized appraisals. Lenders use them to significantly speed up the approval process and reduce costs for consumers. However, Bob Aaron, a Toronto real estate lawyer, suggests automated appraisals may be problematic.

“The banks have been either deliberately or accidentally lulled into believing what the values are – either because they’re sloppy or because they’ve made a conscious decision to ignore values,” he says. He suggests human appraisers may help prevent fraud better than electronic ones.

That may be true in some cases.

On the other hand, tighter margins and fraud potential have made risk management departments more vigilant in the last few years. Their confidence in automated valuation systems (AVSs) comes with good reason. AVSs are highly efficient and they reliably value billions of dollars of real estate every year.

According to insurer representatives we’ve spoken with, automated appraisals are accurate to within +/- 5% of actual value over 99% of the times that they’re relied upon (often they’re not used and a real appraiser is dispatched instead).  Rarely is there a incident of magnitude attributed to AVSs, but when such incidents do make the press, it makes people question them.


mortgage-fraud-preventionA Criminal Intelligence Service report pegs Canadian mortgage fraud at “hundreds of millions” of dollars per year. The Financial Post says it ranges from $300 million to $1.5 billion. To put that in perspective, that’s roughly 3/100ths to 15/100ths of a percent of all mortgages outstanding.

Apart from prevention measures (i.e.  more detailed documentation reviews, technological safeguards, etc.), the industry would also like to see greater deterrents to mortgage fraud. In fact, CAAMP (the mortgage industry’s trade group,) petitioned the government last year to stiffen penalties for mortgage fraud.

“We suggested the penalties should be tougher for mortgage fraud, that time in prison should be doubled. People should absolutely go to jail,” said CAAMP president, Jim Murphy, to the Globe.

There is no better time than the present (after a major event like BMO’s) to revisit the campaign against mortgage fraudsters. Sights also have to be set on the smaller players. For example, we know that some people in our industry knowingly misrepresent and/or omit key information during the application process. They think it’s no big deal, but it is. The actions of these few diminish trust in our profession by lenders and public, and it hurts all of our reputations. Industry participants who falsify mortgage information need to be dealt with firmly and (when caught) removed from the business permanently.



  • Here are more facts on mortgage fraud from the CBA: Link
  • A 2007 report by the FBI suggested 80% of reported mortgage fraud in the U.S. involved industry insiders!
  • Here’s a sample automated appraisal report from MPACexample
  • Here’s a report on automated appraisals from the Appraisal Institute of Canada
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Last modified: April 26, 2017

Robert McLister is one of Canada’s best-known mortgage experts. A mortgage columnist for The Globe and Mail, interest rate analyst and editor of MortgageLogic.news, Rob has been covering Canada's mortgage market since 2007.