Canadianmortgagetrends.com reported that according to
Equifax Canada mortgage fraud has increased 50% in recent years.
Whether you are responsible for an underwriting department
within a financial institution or you yourself are an underwriter, being able
to identify mortgage fraud is your first step to combatting this very serious
problem that hurts the entire industry.
The best way to combat mortgage fraud is to identify when
fraud is present on a deal. Digging deeper and looking for specific indicators
when underwriting will reduce the number of fraud deals that end up being
funded.
Fraud can be committed by many different participants on a
mortgage application, in many different ways, with many different intentions.
Here are some examples:
·
Individuals – homeowners or buyers of a property
·
Group – mortgage or real estate agent or broker,
real estate lawyer, etc…
Individuals, groups and criminals commit mortgage fraud for
different reasons:
·
Information being innocently omitted:
o
An individual forgets that a parent is on title.
o
An individual doesn’t disclose that their home
is under construction or that they have a tenant because they don’t realize it
is relevant, etc.
·
Information being intentionally omitted:
o
An individual intentionally overstates the value
or condition of a home to secure more financing.
o
An individual intentionally fails to disclose a
material fact.
o
A real estate or mortgage broker fails to
disclose a material fact and assists the borrower in presenting false documents
or facts to the lender.
·
Through extensive pre-planning and sophisticated
or technical means:
o
Financing properties and individuals that don’t
exist.
The most common forms of these types of mortgage fraud are
fraud for shelter, fraud for title or fraud for criminal enterprise.
Here are some tips/red flags that can help you identify if
fraud is prevalent on a deal:
·
Income data is difficult to verify, paystub
numbers don’t match up with other data
·
The employment letter is not on letterhead, has
grammatical mistakes or the income or information does not match with other
sources
·
Numbers on paystub, employment letter, T4, NOA
or other income document are rounded off
·
Pay deposits don’t match bank statements
·
Down payment is in cash
·
Significantly more value is being claimed for
the property while the current owner recently purchased it for much less
·
Applicants listed on the deal are different from
those listed as the owner of the property
·
The property appears different than described on
the application
The easiest way to identify mortgage fraud is to have access
to the technology and tools available to run searches, reports and access data
that can help you uncover problematic deals, or worse, a problematic referral
source. Sometimes bad news is good news and taking the extra steps when
underwriting will ensure that fraud deals don’t slip through the cracks.
For more information about how to identify mortgage fraud and the tools you can use to do it please visit www.purview.ca/lenders or call 1-855-787-8439. If you are already a Purview For Lenders client and want to learn more about how to use Fraud Check please watch this brief video.
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