As interest rates rise, it’s harder for buyers to qualify for a mortgage, but that doesn’t stop some real estate agents from making a sale. An undercover investigation by CBC Marketplace has uncovered some networks of real estate agents, mortgage brokers and bank employees who facilitate mortgage fraud for a fee.
They are recorded with hidden cameras that offer to connect buyers with fabricated documents showing false jobs, wages and tax returns, so that buyers can get loans that they would not otherwise qualify for.
It is a profitable business. Realtors say the teams charge a percentage of the mortgage amount for the fabricated mortgage application. This is in addition to other commissions that can be earned after the sale is completed.
Selling a home for $640,479, the median sales price in Canada, a real estate agent would typically earn $16,000 to $32,000 in commission, while a mortgage broker could earn more than $2,550 in a lender’s commission .
- Watch the full investigation tonight at 8:00 PM (8:30 PM NT) on CBC-TV or stream it anytime on CBC Gem.
While some consumers actively seek out and participate in this fraud, Marketplace has learned that some real estate agents are also taking advantage of unsuspecting buyers. Newcomers are especially at risk as they may not fully understand the home buying process. New Canadians are also less likely to immediately qualify for a mortgage at one of Canada’s big banks, as they are more likely to have limited credit and work history in Canada.
Legal and financial crime experts say what Marketplace has uncovered is illegal under the Real Business Brokers Act and the Mortgage Brokers, Lenders and Servicers Act. Submitting a fraudulent mortgage application is also a violation of the Criminal Code of Canada.
Consequences for buyers and the market
This crime also affects Canadians as a whole, says Dan Eisner, CEO of True North Mortgage.
“As interest rates rise and house prices fall, these buyers are more likely to default on their payments and this can increase downward pressure on the housing market through panic selling “, he said.
True North Mortgage has detected and stopped multiple fraudulent applications submitted to the company, along with falsified tax and employment documentation, such as T4s and employment letters that refer to fake business names and phone numbers, where an individual real will collect and there is a real website. .
As home prices continue to plummet, those buyers are at greater risk, Eisner says.
“If people are getting mortgages fraudulently and they thought their backup plan was to sell the house if I can’t afford it, that backup plan is disappearing. It’s also keeping honest people out of the market as they compete for multiple homes.” .
The Real Estate Council of Ontario (RECO) would not speak to Marketplace on camera about the investigation’s findings.
In a statement, RECO Registrar Joseph Richer wrote, “Agents should expect to be prosecuted if they commit mortgage fraud.”
For real estate agents, falsifying mortgage information or assisting in the falsification of information can result in fines of up to $50,000, up to two years in prison, or suspension or revocation of the broker’s license. agent
In the past five years, RECO says it has disciplined seven real estate agents or brokers and laid charges under the Provincial Offenses Act against several others.
Mortgage fraud is a growing problem, according to Carl Davies, head of fraud and identity at Equifax Canada. The credit bureau flags 15,000 to 24,000 suspicious mortgage applications each month for lenders.
“Sixty-seven percent of the apps we find, or that our members flag as fraudulent, are actually related to this type of misrepresentation,” he said. “It’s by far the biggest indicator of fraud or the biggest risk of fraud that we see in this space today.”
Market staff posed as home buyers with hidden cameras
To understand where mortgage fraud often begins, two Marketplace employees went undercover with hidden cameras, posing as new Canadians looking to buy their first home.
The pair visited 10 properties for sale by real estate agents or brokerages where previous investigations indicated fraud.
Marketplace undercover shoppers told each agent they had enough money for a 20% down payment, but were unsure of their mortgage eligibility because one of them had undeclared cash income. This factor alone would disqualify them for a mortgage at Canada’s major banks.
All of the agents acknowledged that the couple would not qualify for the mortgage needed to buy the home, but six out of 10 offered to facilitate the mortgage fraud by connecting the couple with forged documents and brokers who would file the single request on his behalf.
LOOK | Realtors Caught Pushing Mortgage Fraud On Camera:
Realtors Caught Pushing Mortgage Fraud On Camera
Six out of ten real estate agents offered to help prospective buyers get a mortgage fraudulently, according to CBC market research. David Common reports for The National.
“Income is not an issue,” said one real estate agent as he displayed documents he was working on for other clients. “That’s what we convert into their income. Even if you make zero dollars, even if you’re a housewife, we can get the income. The only thing we can’t earn is the credit.”
“You know, by the books, you’re not going to qualify,” said another agent, who went on to describe how his contacts could help. “They’ll document that you’re doing more and they’re going to get you what you want. But they can’t say that openly in public because that’s not true.”
“They’re going to do a T4, pretend it’s on payroll, use any company’s payroll and put their name on it, right,” said a third.
Three of the six real estate agents surprised by offering to facilitate mortgage fraud work for HomeLife Miracle Realty Ltd., which has five brokerages in the Greater Toronto Area and one in Cambridge, Ont. Marketplace has also spoken to several buyers who say agents working for the same brokerage pushed them toward fraudulent mortgage applications or submitted one without their knowledge.
When reached for comment, the agents documented by the hidden camera either did not respond or told Marketplace that they refer clients to legitimate brokers, but do not deal in mortgages.
Ajay Shah, the listing agent for HomeLife Miracle Realty Ltd., said he doesn’t condone the behavior that Marketplace told him he caught on camera and said the three documented agents represent only a fraction of his sales and the 3,000 agents who work under his supervision. .
Real estate brokerage HomeLife Miracle Realty Ltd., has five branches in the Greater Toronto Area and Cambridge, Ont. Three of six real estate agents caught on camera offering to facilitate mortgage fraud work for HomeLife Miracle Realty Ltd. (CBC)
If evidence of misconduct was shown, Shah said he would take action, but ultimately opted out of an on-camera interview and did not view the footage.
“Of course, the most I can do is fire them because I am not the authority to take away their licenses. [agents]. This can only be done by RECO,” said Shah.
Industry needs better oversight, says expert
Forensic accountant Jennifer Fiddian-Green says these findings are an indication that the real estate industry needs better oversight.
“We need regulatory bodies to do more monitoring and come in and do hands-on inspections, all of that,” he said. “We need our frontline people to be alert and agile to be able to respond.”
Mortgage broker Sanjeet Mand agrees that a lack of enforcement is allowing this crime to thrive in the real estate and mortgage industry.
“I think it’s insidious,” he said. “I think we need to get these people out of this business.”
Sanjeet Mand works as a mortgage broker in Brampton, Ont. He worries about the prevalence of mortgage fraud and says more enforcement is needed. (CBC)
Mand said he has lost referrals when some real estate agents have told him they only work with brokers willing to provide fake documents and fraudulent applications.
“Every time you talk to somebody it’s like, ‘Oh, can you do documents for me?’ It shoots our credibility.”
To test how often mortgage brokers will provide false documents without a referral from a real estate agent, Marketplace producers also cold-called 25 brokers or mortgage agents in five popular real estate markets across the country, including the Greater Vancouver, Calgary, Edmonton, the Greater Toronto Area and Montreal. Most mortgage officers said they would not help with a fraudulent mortgage application, but one in five said they would.
“My team will ask for $3,000 and I take a percent of the mortgage amount,” said one mortgage broker, offering to help with the fraud.
In Ontario, the Financial Services Regulatory Authority (FSRA) is responsible for disciplining mortgage brokers. He says brokers in that scenario would be considered in violation of the Mortgage Brokers, Lenders and Servicers Act, which prohibits agents from facilitating dishonesty, fraud, crime or illegal conduct.
In a statement, the FSRA said: “A broker or mortgage broker must not act, do anything or omit to do anything, in circumstances where it should know that by acting, doing the thing or omitting to do the thing, it is being used by a borrower, lender, investor or any other person to facilitate dishonesty, fraud, crime or illegal conduct.”
Mortgage Fraud Boosted at Canada’s Big Banks
Marketplace’s investigation has also found that fraudulent mortgage applications backed by fake employment and tax documents are being driven by people working at Canada’s biggest banks.
“You’ll get the bank rate, you’ll get everything from the bank,” said one estate agent in response to a question…