How to recognize and report mortgage fraud

What is mortgage fraud?

Mortgage fraud is the deliberate attempt to misrepresent or omit information that results in:

• the approval of a mortgage loan
• the applicant being approved for terms that they normally wouldn’t qualify for

Mortgage fraud can be committed by individual borrowers and industry professionals. It is a criminal offence that can result in prosecution.

Mortgage fraud is an industry-wide problem requiring an industry-wide response. It is a growing issue for several reasons, including:

• increased demand for homeownership
• rising interest rates
• higher property values
• greed

Common types of mortgage fraud include:

• Fraud for profit: This happens when a fraudster works with a complicit purchaser to sell the property at an artificially inflated price. This artificially inflated price is then used by the fraudster to deceive a mortgage lender or homebuyer about the true value of the property. Fraud for profit is not concerned with securing housing. Instead, it is focused on misusing the mortgage lending process to steal cash and equity from lenders or homeowners.
• Fraud for commission: This type of mortgage fraud occurs when a broker and other parties work together to use fraudulent documents or other misrepresentation. They do this to obtain mortgages and increase the amount of money they make from commissions as a result of these approved mortgages.
• Fraud for shelter: This is when an individual misrepresents information regarding their credit history or income to qualify for a larger mortgage. Borrowers who commit fraud for shelter are liable for any financial losses due to default and may be criminally responsible.
• Straw buyer: This is a very common form of mortgage fraud. It happens when an individual with poor credit or financial health convinces someone with better credit history and financials to apply for a mortgage on their behalf. A straw buyer has no intention of paying the mortgage. They think that they will not be liable in case of default. A straw buyer is indeed liable for the mortgage and could be criminally responsible for misrepresentation.

How CMHC helps prevent mortgage fraud

• We deliver fraud awareness training to mortgage professionals: This provides them with detection tips on mortgage application key components that are commonly associated with fraud and misrepresentation. We also share the most recent fraud trends and patterns to help front-line professionals detect misrepresentation.
• We also offer mortgage professionals information to share with borrowers: This helps them avoid becoming victims of mortgage fraud.
• Our systems and processes help identify mortgage fraud: We have tools and a dedicated team of senior underwriters to help detect mortgage loan insurance applications with a higher probability of misrepresentation.
• A hands-on approach with approved lenders: We work with approved lenders to identify systematic solutions that mitigate fraud throughout their portfolios.
• We work with law enforcement and report cases of suspected fraud to the appropriate agencies: To help deter fraudsters, CMHC pursues prosecution to the full extent of the law and strongly encourages industry partners to do the same.

How to report suspected fraud or misrepresentation

Lenders are required to immediately report to CMHC if false or misleading information has been provided or is suspected in a CMHC-insured mortgage application. This is the case even when there is no intention to approve the loan.

This will prevent fraudsters from using similar schemes elsewhere and enhance our fraud prevention tools and training. CMHC investigates every report received.

Homeowner reporting

Telephone: Call 1 888 GO emili (463-6454) and ask for a senior officer
E-mail: fraud@cmhc.ca
Fax: 613-748-2783

You can also report by e-mail or fax completing the form, Approved Lender Advise of Fraudulent, False and Misleading Information — Homeowner (PDF).

If possible, please attach a copy of the application documents.

Multi-unit reporting

E-mail: fraudmulti@cmhc-schl.gc.ca
Fax: 613-748-2783

You can also report by e-mail or fax by completing the form, Approved Lender Advise of Fraudulent, False and Misleading Information — Multi-Unit (PDF).

If possible, please attach a copy of the application documents.

*Notes:

• CMHC cannot share the outcome of investigations due to Federal Privacy Legislation.

Related links

Industry partners committed to combatting mortgage fraud:

• The Canadian Anti-Fraud Centre
• Financial Services Regulatory Authority of Ontario
• Ombudsman for Banking Services and Investments
• Canadian Bankers Association
• Consumer Protection Ontario – Reporting a Scam or Fraud