CNBC recently reported found that mortgage fraud jumped 12% year over year at the end of the second quarter of 2018 in the U.S. One in every 109 mortgage applications is estimated to have indications of fraud.
The most at-risk applications are those applying for a new real estate purchase, rather than refinancing — especially as interest rates rise.
Undisclosed real estate liabilities, credit repair, questionable down payment sources, and income falsification were some of the most likely misrepresentations.
Fraudulent income reporting was up 22% annually.
As new mortgage regulations have been introduced for lenders, there is more emphasis put on the amount of total debt compared to income. This brings an incentive for borrowers with high debt to say they have more income — making it seem like they have more wiggle room than reality.
Technology is making this fraud easier than ever to accomplish.
Certain websites will generate fake pay stubs, and even answer phone calls to confirm income verbally. There are also sites where you can buy credit lines to increase your credit.
Occupancy fraud is also on the rise. People will say they live in the property thinking they’ll get a better term than if they are renting it out or flipping it.
While this data is coming from the U.S., it is still important for Canadian mortgage brokers and lenders to be aware.
Equifax reported in 2017 that mortgage fraud in Canada was up by 52% since 2013 and that 13% of Canadians said a little white lie was okay to get the house they wanted.
Thankfully, while technology is making it easier to commit mortgage fraud, it is also helping with catching it early.
For instance, at Purview, our tools are designed to help mitigate fraud and assess risk.
With Purview, you can instantly verify:
- Sales and ownership history – were previous owners corporations? Were transactions arms-length?
- Value – is the value what the borrower claimed?
- Stated mortgages.
- Active judgements or liens.
- Unusual discharges.
- And more.
Lenders can also access our fraud check tool, which gives you up to 18 customizable real estate fraud checks. This can save you time by quickly checking for suspicious activity and flagging applications that warrant further investigation.
The tool you use should be customizable and help you know more, sooner.
Interested in finding out how you can mitigate fraud in your mortgage operation? Reach out to us for an assessment so that we can customize a solution that meets your needs.
Call 1-855-787-8439 or visit Purview today at www.purview.ca.