The Deceivers Among Us

Ten percent of our fellow citizens say it’s okay to inflate income when applying for a mortgage. Nine percent say they’ve already lied on one or more credit applications.

And that’s just the percentage that admit it.

These discouraging figures were released by Equifax Canada this week. Equifax’s Tim Ashby, VP of Personal Solutions, says, “Make no mistake, lying on your loan application is a type of mortgage fraud.”

The problem is, the cheaters in question don’t think that mortgage fraud is a serious crime, and/or they don’t think they’ll get caught.

But shady applicants beware. Lenders are in the business of rooting you out.

Do they nab all of the shortcut takers? Far from it, but they get enough to make attempting fraud a bad gamble.

Sadly, lenders don’t report “soft fraud” to the police often enough. Nor do police prioritize it sufficiently. (“Soft fraud” is a euphemism that describes misrepresenting information to obtain a mortgage on your property.)

When they default, falsifiers raise the cost of borrowing for everyone. Lenders pass along their losses to you and me. The perpetrators themselves lose their properties, are subject to owing shortfalls to lenders/insurers and leave themselves open to criminal charges.

The main weapons battling soft fraud are technology and a lender’s own expertise. And both are getting better.

In today’s age we have information sharing among financial institutions and mortgage default insurers. In fact, most borrowers don’t realize that perpetrating application fraud could get you red flagged at other lenders, seriously affecting your chances of getting an economical mortgage.

That assumes you’re caught, of course — but that is more probable today than ever.

Rob McLister, CMT (email)

  1. As a Mortgage Lender myself, I can attest to that. We have lots of tools and technology at hand in order to detect fraud. Falsified or misleading info (whether intential or not) can be the main aspect, however, it is viewed as pure fraud on our end. The perpetrator gets flagged and the information is shared with all insurers and sometimes other lenders eliminating the possibility of obtaining a loan.
    Although lenders compete against each other, I think sharing fraudulent information should be a priority and made more available – its in everybody’s best interest to do so.

  2. I think this is a good time to remember that as originators, we are the first line of defence. Its not just up to the lender, its all our responsibility to be aware, vigilant, and do whatever we can to make sure these applications never even make it too a lender.

  3. Wonder if this also includes the applicants who state the down payment was a gift when it was borrowed from a line of credit. Fraud is fraud and it would benefit everyone if the people committing this “soft” crime had their names circulated to lenders & insurers

  4. Lying. Oh no.

    Imagine that, not being completely truthful sometimes.

    How about the the other side of the coin, like when people don’t declare all of their income (because some of it’s under the table)?

    Sure, I’d love to live in a world where everyone told the truth all of the time and our government wasn’t monitoring our communications (and then lying about it).

    But hey…that’s life.

    Holy naiveté batman.

    P.S. Someone please wake me when the mortgages in arrears rate starts to climb.

    P.P.S. Besides Ben Rabidoux that is; who believes that anyone who pays attention to mortgages in arrears needs to “sit down and be quiet.”

    1. Appraiser you are suggesting that not declaring “under the table” income to lenders is lying? These people are already not declaring their income for tax purposes. I get that these guys want to have their cake and eat it too, but they aren’t playing by the rules and don’t deserve to qualify for the same mortgages as honest folks.

  5. I’d be curious to see if it’s straight out lying, or just some rounding. If I made $31,750 last year is it lying to say $32,000? If my wife makes the exact same, is it a lie to say our family income is $65,000 a year? It’s just rounding to the nearest $5,000. We did that when we were approved for the our first mortgage. In fact, we did it at the insistence of the broker.I view it as rounding. Letter of the law views it as lying.

    1. Any broker should be looking at the income documents and putting the exact annual figure they calculate into the appropriate fields. If someone is earning $30/hour and states they are working 40 hours per week but the paystubs show 37.5, I’d amend the income from $62,400/annum to $58,500/annum. This isn’t very difficult and there should be no overstating of income that goes through as it is corroborated with paystubs/job letters/NOAs.

  6. Brokers charging innocent clients fees while getting paid by the lender at funding should be considered fraud.
    As for this article lenders are just as much as fault.
    Adios Amigos!

  7. Let’s cut the crap.

    Not reporting income is fraud.
    Lying about income is fraud.
    “Rounding up” income is fraud.
    Lenders are not just as much to blame for people who lie to get a mortgage.

    Do you guys want to make any other false justifications? Don’t stop now. You’re on a roll.

    P.S. WTF do broker fees have to do with this article? Maybe Banker would like to explain why some bankers tell applicants “The best rate is on the bank’s website” while other bankers actually give people fair rates. Any fraud there?

  8. I agree with ABroker.
    Let me give you a run down:

    When you provide your broker or lender a job letter and paystub for a job you intend on quitting tomorrow – that’s a fraud. When you work part-time or contractual hours but convince your lender you have permanent full time hours – that’s a fraud. When you try to buy an owner-occupied property but your real intention is to fully rent it – that’s a fraud. When you have a small side business but really work elsewhere to accumulate just enough hours in order to collect EI, then try to qualify under the self-employed stated income program – that’s a fraud. When you ‘forget’ to mention you own other properties – that’s a fraud. When you’re divorced but declare you’re single just to avoid divulging you pay alimony – that’s a fraud.

    These examples seem exaggerated, but they are all real examples of cases I see on a daily basis.

    Shall I go on????

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