Last week we spoke to a crown attorney whose caseload consists largely of mortgage fraud.
He says he comes across document-related fraud day in and day out and cites a surprising number of cases where bank insiders claim to “accidentally overlook” or turn a blind eye to doctored job letters, pay stubs, etc.
Most of the cases that make it to court involve calculated criminal plots where there’s more than one criminal party and/or the lender has incurred material losses.
The bulk of fraud, however, is fraud for shelter. That’s when mortgage applicants plan to live in the home and misrepresent their qualifications to get approved.
In researching this story, we spoke with a few underwriters who say that fraudulent documents pop up regularly. At least 1 out of 50 applicants submit “highly questionable” or fraudulent documents, they estimate. Some say that ratio is higher.
When banks find these doctored documents, the application is stopped dead in its tracks.
What lenders don’t do often enough, say the underwriters we interviewed, is report these incidents to the police. “It’s a PR nightmare to prosecute,” one of them told us.
Moreover, authorities tend to focus on criminal “fraud for profit” as opposed to fraud for shelter.
Make no mistake, however. Submitting altered documentation to misrepresent your income or down payment is fraud, plain and simple. “The Criminal Code clearly states that obtaining funds, including mortgages, by providing false information is a crime,” says the Canadian Association of Accredited Mortgage Professionals.
Despite the persistence of document fraud, underwriters say it was worse 5-6 years ago. Since then, lenders have more procedures, training, and technology in place to fight document fraud.
Rob McLister, CMT
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