Don’t Fool With Your Docs

We came across a mortgage customer this week who decided it was a good idea to change the date on his job letter. Apparently it was old and he didn’t want to ask his employer for a new one.

Sure enough, the lender called his employer’s HR department to validate the job letter and sure enough, the lender asked the employer to confirm the date it was issued, among other things.

When the employer stated a different date than the date on the job letter, the lender caught it immediately. The client’s mortgage application was immediately declined.

“I didn’t think it was a big deal,” the borrower told his broker, unashamedly.

But it was a big deal. It was fraud.

The minority of people who perpetrate these frauds think their “white lies” won’t be discovered, but they’re wrong, they routinely are noticed.

And lenders can be obligated to report them when they’re found. In some cases, that can block the offending borrower from getting a mortgage elsewhere, particularly if they seek default-insured financing.

Doctoring documents is not only illegal, it’s fruitless…i.e., not worth it. But that doesn’t stop people.

An Equifax survey last year found that 12% of Canadians admitted to providing false information on a credit/loan application. And 16% considered it a victimless crime. Both numbers were materially higher for millennials.

Mini-frauds like this happen all the time in the mortgage industry because enforcement is lax. Authorities don’t prioritize “fraud for shelter” cases so there are no prosecutions and no deterrent effect. That’s a major reason why fraud keeps growing (in absolute numbers) despite increasingly sophisticated lender technology to spot it.

Hopefully 99% of people reading this would never attempt such deception. For those in the 1%, here’s some advice: Don’t be a short-sighted document cheat, not if you actually want to get the loan you seek.



7 Comments

  • JP says:

    With everything going electronic it is so easy to photoshop paperwork. I have to think that this alone is leading to higher fraud rates.

  • Where do you draw the line?

    I suspect the quoted 12% refers mainly to credit card applications. Someone who makes $55k may falsely state they make $65k in order to get a Visa Infinite card with more perks than a basic card. It technically meets the definition of fraud in the sense that it is deception done for a personal gain. However it probably doesn’t meet the definition of fraud in the criminal code due to the inability to objectively quantify the value of “the subject-matter of the offence”.

    Rob, I’m sure you know of more than one broker that will help clients commit mortgage fraud, where they know the client won’t be caught. One example would be “exaggerating” on stated income mortgage applications.

    • The Spy says:

      Not sure of your point or what you’re advocating for, Ralph. It’s fraud. It’s against the law. It needs to be reigned in. End of story. The stats cited are from Equifax and specifically for mortgage applications, not credit cards. As for your last point, we don’t keep company with the brand of brokers you cite.

  • JC says:

    Not prioritizing “fraud for shelter” seems to imply that people did it because they were homeless. Lending policies are there to make sure the buyer can afford the property with their declared income (and that they are declaring their taxable income). But the reality is that many people whose manipulate documents are actually buying a second or 3rd income property and no longer meet lending guidelines. They could get financing in the secondary or private lending market but they prefer to forge documents and get a lower rate at the primary banking institutions. Mortgage fraud is always out of greed not necessity.

  • Rob, my point is that the line is not always clear and simple. Some things, like making a declaration that you intend to reside in a home that you’ve purchased in order to get an insured mortgage, while at the same time listing it for rent, are clearly fraud.

    Other situations are more subtle. What about when someone who owes one or two grand to a family member does not declare it on a mortgage application?

  • Bank customer says:

    Hello,

    I’ve got a variable rate mortgage right now, but would like to switch my rate to fixed rate. Is this treated as renewal? When we’ve signed the mortgage we’ve got a switch cashback offer (for moving banks) which is repayable on early renewal. Is the bank right in requesting this bonus to be repaid?

    Thank you in advance for your advice

  • BDM says:

    Don’t forge documents. I think that line is pretty simple Ralph.

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