Prime Time Crime


(Prime Time Crime exclusive June 12, 2015)


Mortgage Crime


By Eve Field

On The Rise and Often Unchecked


There is no such thing as a ‘perfect crime’ but mortgage fraud is considered by many to be as close to a perfect crime as you can achieve. It doesn’t involve fire arms, violence, or getting your hands ‘dirty’, can be undertaken from your sofa or computer station, and if it is successful then it is one of the most massively lucrative modern crime constructs. You may not have heard of mortgage fraud, but it is occurring at an unprecedented and rapid rate across Canada. Two men in Calgary have recently been charged (a former lawyer and a former mortgage broker) in a multi-million dollar mortgage fraud case where seven property owners were defrauded and had significant sums of their life savings taken from them. This case has brought mortgage fraud into the mainstream and caused both current homeowners and financial institutions to begin to sit up and take notice.  

By 2013, mortgage fraud accounted for $400 million worth of fraud in Canada: a figure that accounts for approximately two thirds of all of the financial fraud in the country. This is a huge increase of around 50% more than in previous years, according to statistics released from Equifax. Whilst the concept of mortgage fraud may seem complicated, it can actually be surprisingly simple and you may well be shocked to know that you are likely to know someone who has or is committing mortgage fraud.  

What is Mortgage Fraud?


Mortgage fraud covers a huge spectrum of crimes, and is a crime that can be committed on both a small and large scale. At its smallest level is ‘first party mortgage fraud’: this is when an individual misrepresents themselves in order to obtain their mortgage they might not otherwise obtain. Lies about their earnings, forged payslips, hiding a disability (or exaggerating one to take advantage of beneficial rates that are occasionally issued to those with mobility issues) and misrepresenting the reason you are choosing to purchase a property are all forms of first party mortgage fraud. Telling your mortgage provider that you will be living in a property when you actually intend to rent it out is another example of mortgage fraud. Larger incidences of insurance fraud occur when home builders, mortgage brokers, and even those working within banks create fraudulent documents or issue mortgages against properties where the value of the property has been deliberately under or over estimated, the documents of the applicant have been forged, or the mortgage rates are fixed artificially in order to make a larger profit.

How Can Mortgage Freud Be Prevented?


The reason that mortgage crime in Canada is often left unchecked? Because there are simply not the resources to police the issue properly and, for many, despite the huge financial sums involved, many still perceive mortgage fraud to be a relatively minor crime. In fact, first party mortgage fraud is considered to be ‘soft’ financial crime and the penalties for it are very small: often if first party mortgage fraud is noticed then the application will be rejected, but no further action will be taken. Whilst when someone is trying to defraud a financial institution, or a string of individual homeowners, for a huge sum such as the $5 million dollar case detailed above, the police and the financial institutions involved have to step up and take action, for smaller cases where the request of a single mortgage is the only finances involved, pursuing a prosecution simply isn’t considered the financial output of both staffing and resources, given the relatively small figures involved.

Turning around Canada’s current uptrend in mortgage fraud certainly won’t be easy. Those working within the mortgage industry often aren’t trained to spot the tell-tell signs of a fraudulent application, meaning that they are often being issued unchallenged. The overstretched police forces, particularly in growing cities such as Calgary, don’t have the man power they need to investigate mortgage fraud cases. And lastly, in cases of smaller fraud, the financial institutions themselves are reluctant to prosecute their customers. It is only when mortgage fraud is accepted and acknowledged as the important and significant threat to the nation’s finances that it is, that we will really see change in this area. 

        Prime Time Crime                              Contributing 2015