When it comes to buying a home or renewing a mortgage term, many financial experts recommend using a mortgage broker to help find the best mortgage rate and terms. The reason is that mortgage brokers work for you – not the bank (even though they’re paid by the lender and not the client) – and can leverage their large network of lenders to access the most favourable mortgages based on their clients’ needs.

Mortgage brokers gone bad

But some mortgage brokers are taking that notion too far; forging documents, creating fake pay-stubs, employment letters, bank statements, and tax documents to help clients qualify for mortgages. In this shocking expose, Globe and Mail real estate reporter Tamsin McMahon revealed how mortgage fraud is thriving in Canada’s hot housing market.

The article goes on to suggest that mortgage fraud is so rampant in this country that as many as one-in-10 mortgage applications will have some element of fraud. This happens when would-be home buyers can’t quite qualify for a conventional loan, a problem which has been exacerbated in recent years by soaring home prices.

An anonymous mortgage broker from Ontario said:

“It’s happening on such a level that some bank reps, mobile mortgage reps, have said: Call a mortgage broker, they can probably find a way to make your income higher.”

It’s a scary environment when so-called industry professionals are willing to commit fraud to get a mortgage deal done at any cost – which brings back memories of the U.S. subprime real estate meltdown and infamous “NINJA” loans (no income, no job, no assets) of a decade ago.

McMahon shares a scenario where some mortgage brokers – who typically do not charge clients fees up-front – are charging fees in the thousands to create fake bank statements, tax documents and pay stubs from non-existent companies, and will often hit clients with steep charges when they go to renew a mortgage that was funded based on forged documents.

After Home Capital Group, one of Canada’s largest alternative mortgage lenders, suspended 45 mortgage brokers for allegedly committing fraud on mortgage applications, many brokers began advocating for tighter industry rules.

Clearly something needs to be done to regulate an industry where brokers (and their clients) are incentivized to lie and cheat just to keep up with our insane housing market that has been fuelled by greed and cheap access to credit.

Four years ago I wrote an opinion piece on why I’ve never used a mortgage broker and after taking a lot of heat from the broker industry over it I swore I’d never write another one. But here we are.

I’ve seen the sleazy, underhanded side of the profession and I unfairly painted all brokers with the same brush. The truth is that there are plenty of great independent mortgage brokers out there who look out for their clients’ best interests (within the rules). Unfortunately, much like advisors in the financial services and investment industry, good brokers are often overshadowed by unethical ones who choose to play outside the rules in order to line their own pockets.

Readers: Have you heard of mortgage brokers or clients who have falsified documents in order to qualify for a mortgage that they wouldn’t otherwise be able to afford?

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11 Comments

  1. Big Cajun Man (AW) on November 1, 2015 at 12:41 pm

    I know of folks who I would have not dreamed could get a mortgage, get one through a mortgage broker, but nothing I could prove. There is a lot of fishy things going on these days (unfortunately).

  2. Potato on November 1, 2015 at 1:23 pm

    Similar to BCM, nothing solid, but lots of people who define good as the ability to fund a deal that was rejected elsewhere. “Oh, go to my guy, he’s the best, he’ll find a way to make the numbers work for you.”

  3. Sean Cooper, Financial Journalist on November 1, 2015 at 8:18 pm

    I don’t like to make absolute statements like never (as they say in Star Wars, only a sith deals in absolutes). Most mortgage brokers are good. It’s just a few of the bad apples that ruin their reputation. Hopefully they can clean up the industry and get read of these fraudsters.

  4. Todd Roberts on November 2, 2015 at 7:11 am

    Like all industries, the bad sully the reputation of the good. But sometimes, and without the fraudulent means described here, a broker can get a deal done that a bank cannot. I knew a TD mobile mortgage rep that referred his “B and C deals” to a broker. His lending criteria were too tight for self-employed, prior bankruptcy, etc. Even for “A clients”, I still recommend they use a good mortgage broker over simply going back to the same bank over and over and taking what they offer which seems to be how many people renew their mortgages.

  5. Kurt on November 2, 2015 at 8:18 am

    At that point the client is just as responsible as the broker. There is scum in every profession. Except mine. 🙂

  6. Sharon C on November 2, 2015 at 9:58 am

    This is a timely article for me. My mortgage renewal is due Dec and was working with my mortgage broker on the details of a new mortgage. We had a personal meeting followed up with several phone calls with how he was looking to provide me with a new mtg that might increase my cash flow. Our last telephone call was late Thursday afternoon with the understanding he would make a few calls and get back to me the following day….Friday. Did not hear anything, but on Monday I received a telephone call from someone else in the same company letting me know that my documents were now with them as my broker is no longer with the company and is no longer in the industry. Unfortunately they have not given me any explanation other than “we have no details, and do not know what personal reasons he had for making this decision over the weekend”. Something appears wrong here from what I can see.

  7. Tommy on November 2, 2015 at 11:54 am

    loans… When my daughter had only a part time job as a student, they gave her a new car- hmmmm! What did the rep put down for income, I wonder.

  8. Andrea Sammut on November 2, 2015 at 1:07 pm

    I would argue that committing fraud is not “taking the notion too far” in helping a client. It is a crime. Don’t sugar coat what some brokers, mobile specialists and bank staff are doing, call it what it is. A true mortgage professional will tell you if you don’t qualify, they will NOT break the law to help you do so!

  9. DivGuy on November 4, 2015 at 12:44 pm

    There are professionals and then there are some professional criminals! 😉 I wonder if all people not in the business understand the importance of such fraud though.

    Mike

  10. germack on September 11, 2016 at 3:02 pm

    The problem is that even when they got caught forging documents hardly anything happens. They get a slap on the wrist and thats it. very sad.

  11. Yen on February 25, 2019 at 9:39 am

    My mom was recently starting to work with a mortgage broker named carol Song in BC and I looked her up and she is not even licenced. FICOM notified but they work so slow in going after this behavior

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