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Tuesday, March 28, 2023

Housing affordability challenges resulting in elevated threat of fraud

With larger costs and rates of interest placing the dream of homeownership additional out of attain, research recommend Canadians are extra snug inflating sure particulars of their mortgage software — a type of fraud that would have critical authorized ramifications.

In accordance with a latest survey performed by Mortgage Professionals Canada (MPC), a 3rd of non-homeowners don’t suppose they are going to ever be capable to buy a major residence. That’s up from 25% simply six months prior, in addition to 18% on the finish of 2021, and represents a brand new document excessive.

The survey additionally discovered {that a} majority of Canadians are apprehensive about their funds within the subsequent six months, with 60% now feeling the pressures of inflation, up from 40% simply six months prior. Moreover, 14% of first-time homebuyers report having difficulties making their funds.

“Within the context of this heightened rate of interest setting, coupled with persistent inflation, it creates the danger situations of additional pushing common Canadians out of the federally regulated system and into riskier and extra expensive mortgage options,” stated Lauren van den Berg, President and CEO of MPC. “It additionally will increase the danger of mortgage fraud.”

In accordance with a latest survey performed by Leger for BNN Bloomberg, practically half of respondents suppose mortgage fraud is widespread in Canada; 17% imagine it’s acceptable to inflate one’s revenue and 18% imagine it’s acceptable to misrepresent your employment to be able to safe a mortgage. These numbers surpass 30% amongst Canadians aged 18-34, and those that stay within the nation’s costliest actual property markets.

An identical research performed by Equifax Canada discovered that 13% imagine it’s okay to lie to be able to get the home you need, with 16% seeing it as a victimless crime. The credit score bureau additionally famous a 52% improve in suspected fraudulent mortgage purposes since 2013.

Relying on the circumstances, the punishment for these charged with mortgage fraud ranges from a adverse mark on their private credit score report back to critical jail time; as much as 14 years for many who are charged with fraud over $5,000.

“Contemplating the elevated dangers, there is a crucial position for the mortgage trade to fight fraud,” stated van den Berg. “There are methods for homebuyers to guard themselves from unhealthy actors and granting mortgage professionals the capability for CRA-enabled revenue verification is vital to serving to forestall fraud.”

MPC welcomes new regulatory measures towards fraud

MPC is in favour of larger regulatory measures to crack down on cash laundering and fraud, van den Berg provides, and can be looking for to higher equip mortgage professionals with the instruments they should help in that effort. Particularly, she factors to revenue and id verification as a vital device to catch and stop mortgage fraud, which is why MPC has formally requested the federal and provincial governments grant revenue verification to the mortgage trade.

“We’re inspired that the CRA has already been engaged on validation choices comparable to a easy sure or no validation of Line 15000 of a tax return,” she stated. “This device is a essential answer required by our trade to assist to cut back fraud throughout the housing sector.”

MPC additionally provides instructional sources for mortgage professionals devoted to fraud prevention, together with some extra sources out there on its web site. That features info brokers can cross on to shoppers, such because the fundamentals of ordering a credit score report, how you can report suspected fraud to the federal authorities and tips about how you can guard towards fraud whereas looking for or closing on a house.

“Defending towards fraud is a part of our job as mortgage professionals. With stories of mortgage fraud up, we proceed to take this very critically,” added van den Berg. “Throughout this fraud prevention month, it may be a possibility to brush as much as finest serve and educate yourselves and your shoppers.”

Nevertheless, van den Berg additionally acknowledges the vital position that addressing housing affordability challenges would have in decreasing situations of mortgage fraud in Canada.

“We have to take motion to assist ease housing price pressures Canadians are going through within the current second,” she stated. “With applicable insurance policies in place, the federal and provincial governments can assist make sure the dream of homeownership stays out there to all Canadians.”

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