mortgage fraud

How to prevent mortgage fraud in Canada

Mortgage fraud is becoming increasingly common in North America, notably in Canada. What is it, and how can it be a possibility? Mortgage fraud is knowingly falsifying information on legal documents and working with fraudulent people to make that happen. 

Who is involved in the fraudulent scheme? 

There are four parties involved: the prospective buyer, their real estate agent, their lawyer, and their mortgage lender. The documents are filled out and falsified using Photoshop or other creative tools. The loan appears to be completely normal; it gets approved, and the deal becomes finalized. Once the deal is finalized, the new homeowners realize they can’t afford the mortgage and end up in financial ruin. 

In October 2022, CBC Marketplace ran an exposé on mortgage fraud in Canada using hidden cameras and hired actors to help catch mortgage income fraud in the act. In the exposé, real estate agents met with prospective homeowners who, based on their current income, were unable to obtain a mortgage; therefore, the agents indicated that they could falsify papers such as income statements and others that are required to secure a mortgage in order for them to secure a mortgage. Home ownership may appear to be a pipe dream when interest rates climb, and desperate people may succumb to the temptation of falsifying their mortgage documents.

What happens when this type of fraud is discovered?

When financial institutions discover this type of fraud, they usually do not disclose that information because admitting they were defrauded would jeopardize their reputation and brand image. Recently, banks have been coming forward and exposing these fraudsters in hopes of preventing fraud from happening.

What is the solution?

Preventing fraud can be simple; the difficult part is finding the correct solution provider. The obvious solution is for the Canada Revenue Agency (CRA) to confirm to banks that the income stated on a mortgage application corresponds to the income stated on the individual’s Notice of Assessment. The IRS in the United States uses a similar strategy that has effectively eradicated fraudulent behaviour. Unfortunately, it takes a long time to implement something through the government. It is quicker and more efficient to use a third-party platform to help you verify that the person is who they say they are. 

What would the platform need to offer?

The platform would need to offer you direct access to the CRA so you can easily verify the individual’s identity and confirm that the information they’re providing matches their Notice of Assessment. But the most critical component that people are looking for when providing access to their CRA is that none of their data is saved in a third-party database. Furthermore, the identity provider must include extended PEP and sanctions screening as well as the ability to verify any business entities that the individual has in their name in order to prevent identity fraud and money laundering. In our opinion, this would be a game changer!

The last solution is, IDVerifact, the most advanced solutions aggregator that can provide everything listed above… and more.

verify with IDVerifact

With IDVerifact, you can check if the person is who they say they are and if they are involved in any fraudulent behaviour. IDVerifact’s CRAView provides a complete set of tools to obtain reported income from the Canadian Revenue Agency directly without your clients needing to produce hardcopies of NOAs or any other documentation and without storing any of that delicate data. OREA, TREB, REBGV, GMREB, and other real estate boards across Canada should implement a tool that can easily verify the person’s identity. Our robust set of solutions can fit any business use case.