13% of Canadians Would Lie Applying for a Mortgage
A survey by Equifax Canada, a leading consumer credit company, indicated the following regarding mortgage fraud:
13% of Canadians felt when applying for a mortgage, a white lie to get the house they want is okay.
16% believe “mortgage fraud is a victimless crime.”
8% “admitted to misrepresenting the facts on credit or loan application.”
Equifax further noted that since 2013 there has been a 52% increases in “suspected fraudulent mortgage applications.
What is Mortgage Fraud?
CMH defines mortgage fraud as deliberately misrepresenting in order to obtain a mortgage. It cites the following 8 deceptive acts::
“Misstating your work position, your income or the length of time you’ve held your job
“Stating you’re a full-time salaried employee if you are not
“Misrepresenting the amount or source of your down payment
“Claiming a rented property is owner-occupied
“Not disclosing other mortgages or debts
"Omitting information to inflate the value of the property
“Adding purchasers’ names on the mortgage application who do not intend to take responsibility for the mortgage
“Acting as or using a “straw buyer” – a person whose good credit is used to get a mortgage for someone else”
Fraud May Create Liability and Criminality
Such acts, CMHC warns, make the borrower liable for financial shortfalls should default occur, and they can be held criminally responsible. Aside from some borrowers inflating their income, CMHC believes that notices of assessment from Canada Revenue Agency can be printed and easily falsified.
CMHC Asks CRA to Verify Incomes
CMHC recently asked CRA to take a more active role in verifying income borrowers are claiming on mortgage applications. CMHC sees this association as necessary due to sophisticated increases in fraudulent threats. So CRA is looking into secure ways to share information with financial institutions conditional on client consent. Such direct access by lenders should speed up income accuracy and verification, speeding up the approval process.
Budget: CRA to Crack Down on Tax Avoidance
To address tax non-compliance in real estate, the Feds are giving CRA $50,000,000 to create audit teams to ensure the following:
Taxpayers report the sale of their principal residence,
Any capital gain from a property sale is identified & taxed,
Ensure money on real estate flipping is reported as income,
Commissions earned are reported as taxable income,
Builders of new residential properties remit the appropriate amount of tax GST/HST to the CRA.
To Deter Financial Crime in Real Estate, including mortgage fraud and money laundering, the Budget is strengthening enforcement by expanding its “outreach and examinations in the real estate sector.”