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Mortgage Fraud or Innocent Oversights?

Mortgage fraud – two words that make every lender and broker cringe.

With the backdrop of COVID-19, the chances of fraud have increased. While sometimes the fraud is intentional, at other times, the customer may not even know that he or she is engaging in fraudulent activities.

This is why mortgage brokers have to use their tools and expertise to make informed decisions.

What May Be the Root Cause of Fraud?

COVID-19 has affected the financial standing of many individuals across the country. While temporary relief measures like the Canada Emergency Response Benefit (CERB) and mortgage deferrals were in place, they’ve now come to an end.

This means that many customers will be faced with tough financial decisions and may misunderstand or misrepresent their financial information.

Another reason may be the tightening of mortgage rules. The Canada Mortgage and Housing Corporation (CMHC), recently announced that:

  • It is limiting GDS/TDS ratios,
  • Establishing a minimum credit score of 680,
  • And is no longer considering non-traditional sources of down payment as equity.

This means that many prospective home buyers will not be able to qualify and may resort to mortgage fraud.

Another surprising fact is how millennials view some aspects of the mortgage application process.

According to a recent survey conducted by Equifax, about one-quarter of millennials believe that it is okay to inflate their income when applying for mortgages.

What Types of Fraudulent Activities Should You Be Wary Of?

There are multiple types of fraudulent activities that are done, intentionally or unintentionally, by borrowers across Canada. Some of these are:

  • Housing Fraud – done to acquire or retain the ownership of a house.
  • Occupancy Fraud – not sharing accurate information about who will be living in the subject property.
  • Home Appraisal Fraud – occurs when the owner inflates the value of the property beyond its actual worth.
  • Financial Income Fraud – the motivation behind this is to incorrectly report your income information to get a better deal.
  • Fraud for Shelter – this is particularly relevant during COVID-19, as buyers may indulge in fraudulent activities to purchase a house to occupy and benefit from the all-time low interest rates.

LAWPRO, a professional liability insurer for Ontario lawyers, shares a factsheet that provides a deep dive into different types of frauds.

How Do You Tackle Fraud Issues?

It is easy to miss some of these issues, especially when you are working with a huge volume of applications.

The Purview AVM can help!

It provides you an accurate estimate of the market value of a residential property based on an analysis of public record data, property location, market conditions, and real estate characteristics at a specified date.

Lenders also have access to a Fraud Check Report which provides them a real-time fraud check on the subject property. It includes eighteen configurable queries that check for indicators of suspicious activity on the property under review, providing you a summary for each applied fraud parameter.

By integrating these tools, you can not only identify fraud at an earlier stage but also improve the lender-broker relationship.

Learn more about our fraud detection solutions. Reach out to us on 1-855-787-8439 or visit www.purview.ca.

What has your experience been when it comes to mortgage fraud in Canada? Let us know on social media. Purview is on FacebookTwitter, and LinkedIn.

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