The Fight Against Mortgage Fraud: What’s Happening?

 Canadians are generally content and often stick to the status quo, a trait that has served us well during economic challenges like the 2008 financial crisis. However, with mortgage fraud soaring by 52% in recent years, complacency is no longer an option.

The Reality of Mortgage Fraud

The mortgage application and approval process in Canada has become increasingly complex due to policy changes and new regulations designed to protect homebuyers. Despite these changes, the susceptibility to mortgage fraud has remained largely unchanged. The structure of the Canadian mortgage system makes it easy for fraudsters to exploit. The process heavily relies on information and documents provided by borrowers, creating an easy entry point for fraud. A major question is why lenders don’t obtain information directly from the relevant sources. A simple solution would be to require information to come exclusively from verified sources.

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Harnessing Available Technology

Canada is behind the United States and the United Kingdom in requiring information from verified sources only, but the technology to combat fraud exists here. Applications like Finicity and Flinks can directly access funds, payments, and income data from a consumer’s bank account. Although this technology is not yet available in the mortgage industry, implementing it should be straightforward.

The CMHC has initiated a similar measure with the Canada Revenue Agency, allowing direct income verification. This access provides a borrower’s Notice of Assessment with their consent. Despite support from Canadians for an improved process, progress has been slow. The CRA needs a formal program to access data, and the CMHC should guide this process.

Combating Mortgage Fraud

It's in the best interest of lenders, borrowers, and mortgage professionals to combat mortgage fraud. Industry regulators alone don’t have the resources to fight it effectively. An amendment to the overall lending process would make it easier for lenders to operate with less risk and interference.