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COVID-19 Fallout and Mortgage Fraud

Throughout the COVID-19 pandemic, fraud has been an ongoing issue.

One mortgage broker reported a client that committed CERB (the Canadian Emergency Response Fraud) mortgage fraud. The client was receiving regular payroll deposits, but decided to get the CERB deposit from the Government of Canada.

“Both my cousins said it was fine, they just applied and got it, so I applied and got it,” the client allegedly said.

The lending institution ended up cancelling the client’s mortgage application due to mortgage fraud.

CERB fraud aside, even before the pandemic, mortgage and real estate fraud — such as title fraud or misrepresenting income — were important to mitigate. Now this due diligence is critical.

CBC News also reported that as of May 1, 2020, Canadians had lost more than $1.2 million to COVID-19 scams.

While the types of fraud schemes CBC noted are mainly consumer-driven, they could have fallouts across different industries. Take, for instance, title fraud.

CPA Canada recently noted that in order for title fraud to be committed, the fraudster must commit identity theft first — which could be accomplished through a COVID-19 scam.

Sylvain Paquette, president of the Canadian Credit Bureau, told CPA Canada that fraudsters could use phony job offers to gather personal information directly from candidates, for instance.

CPA Canada also reported that mortgage fraud could be an issue, and one that the homeowner is not even aware of “until it becomes difficult for them to pay their mortgage and they realize the home they purchased was, in fact, not within their means.”

While sometimes mortgage fraud is malicious, that is not always the case. It can often be an omission or a little white lie to get the mortgage. Equifax found in a 2017 survey that 13% of Canadians felt it was okay to tell “a little white lie” when applying for a mortgage.

With COVID-19, for instance, many Canadians have lost some or all of their income — but if they apply for a mortgage, would they report a loss in income, particularly if it is a reduction in their hours (and not necessarily a layoff)?

Borrowers that misrepresent information and straw buyers could also become more prevalent.

Staying Vigilant Against Fraud Risks

Due diligence is always important for mortgage lenders — and even more so during the COVID-19 pandemic.

The first step in staying vigilant is knowing what to look for. While you may not always be able to verify an applicant’s income, certain flags can point to warning signs of potentially suspicious activity.

These include:

  • Active mortgages.
  • Recent sales.
  • Prior foreclosures.
  • Whether the vendor is a corporation.
  • Active cautions.
  • Active liens.
  • Power of sales.
  • Unusual discharges.
  • Frequency of power of sales in the area.
  • Whether there are any concurrent mortgages.
  • Active judgments.
  • And more.

The Fraud Check solution from Purview enables lenders and insurers to verify all 18 of these risk flags during a deal. If you need to dig deeper, you can also access a property title search and acquire Instrument Images.*

You can also monitor charges on title for properties of interest, which would allow you to see if a new charge or encumbrance is added or removed. Learn more.

Access these solutions and more today by calling 1-855-787-8439 or visiting www.purview.ca.

* An official product of the Ontario government pursuant to provincial land registration statutes.

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