Fraud for Housing is Still Fraud

When you think of someone committing mortgage fraud, you may immediately think of a criminal mastermind, lurking in the shadows, not thinking or caring about those whose lives they are destroying. And while it’s certainly true there is an organized crime element to many fraud-for-profit schemes, not all mortgage fraud is for profit. The most common mortgage fraud is actually fraud committed for housing, not profit.

Fraud for housing occurs when mortgage applicants give false or misleading information on their application in order to qualify for a mortgage they wouldn’t normally qualify for. This could mean inflating their income or misrepresenting their level of debt. Even though the false or misleading information might seem of little consequence, and the perpetrators may intend to make payments on their mortgage loan, it is still fraud.

According to the Criminal Code of Canada, perpetrators who provide misleading information in order to obtain funds, including a mortgage, could face 10 years in prison.

Let that sink in.

Mortgage applicants have a responsibility to provide accurate, truthful information on a mortgage application. Lenders have strict underwriting policies for a reason. They only lend money when it is likely they’ll get it back, with interest. If they make a decision to lend you money as the result of you lying to them, it is basically stealing.

Fraud for housing can also occur when someone is purchasing an income property. If you tell a lender you’re going to live in the property, but you’re actually going to rent it out—that’s fraud.

These are all examples of fraud:

• misrepresenting income
• misrepresenting debt level
• misrepresenting whether or not you will be living in the property
• claiming your down payment is a gift when you are actually borrowing the money
• submitting any altered documents

Licensed real estate and mortgage brokerage licensees receive training to detect mortgage fraud, including when they suspect false information in an application. And the lenders themselves have beefed up their own training, procedures, and technology to catch fraud early in the process.

Is a house you may not be able to afford honestly worth 10 years in prison? It doesn’t matter if you make your payments and the bank never finds out. A lie on a mortgage application is fraud and it’s illegal. And should an industry professional ever participate in such a fraud, they could face sanctions from RECA, criminal charges and could forever damage their reputation. Remember, always be truthful and accurate when you make a mortgage application.