Fraud on the Rise? Calgary Cop Kristie Verheul of the Economic Crimes Unit Thinks So

Mortgage fraud is a national issue that governments from province to province are working hard to combat. However, no matter how much effort is put in, it seems to be a problem that is continually on the rise!

According to a recent article in the Calgary Herald the Alberta police have reported that:

• The number of cases of reported fraud is steadily rising and this can be largely attributed to technology. Criminals are using both old methods and new technologies to scam victims, and so we need to embrace technology to identify and combat.
• In 2012, Calgary Police received 2,881 fraud complaints. The number of complaints rose to 2,961 in 2013 and totaled 3,052 in 2014. This number includes mortgage fraud.
•  However, because fraud so often goes unreported, the numbers out there likely don’t even come close to representing the amount of fraud actually occurring: “These stats are actually exponentially larger than they appear as they often include multiple frauds within one case file.” http://calgaryherald.com/news/local-news/fraud-on-the-rise-theres-a-lot-of-really-smart-criminals-out-there-nowadays.

The issue of fraud is not one isolated to Calgary – this is occurring across Canada with organizations such as CMHC, title insurance companies, local and provincial governments, and lenders and brokers alike posting and making this very serious issue a priority. Why? Because it costs us all!

Fraudsters are not the only ones that can use technology to be effective – you can too!

• Take the time to really read your client’s Equifax credit report
• Review property searches in Purview
• Perform Google searches to validate employment information
• Commit to continuing education – subscribe to blogs to stay in the loop about new and innovative forms for fraud
• Use social media to share your discoveries and learnings

These measures can put you on a level playing field with fraudsters! Take advantage of these tools by calling Purview For Mortgage Brokers today at 1.855.787.8439.

#FAM - Fraud Related to Employment Status or Down Payment/Equity

Fraud related to employment status or down payment/equity is one of the most common forms of fraud that occurs on a day-to-day basis. Why? Because these are some of the easiest forms of fraud to commit. This is why we have to fight fraud – because these types of fraud are committed so casually that they will surely lead to increased application scrutiny if we don’t work together to eliminate them.

Typically, self-employed individuals require increased income verification compared to those who work for a company and receive a computerized paystub. Where an applicant is employed, a lender is likely to ask for a current paystub, job letter and perhaps some banking history. If your client is self-employed on the other hand, they may need to provide 2 years for notice of assessment, T1 generals, financial statements and bank statements. Because some self-employed folks show a much smaller income after expenses are deducted, this makes getting deals done for some self-employed folks difficult – even when you know that they have money. This sets the stage for misrepresentation of employment.

Whether the client endeavours to do this on their own, or they have help from a broker, many self-employed individuals will represent themselves as employed. How can you identify if someone is really self-employed? In this regard, Google is your BFF.

1. Google your client. If you see them identify themselves online as owner, president, managing director – this could be a sign that your client may be self-employed.
2. Even if the bank only wants a paystub and job letter, ask the client for 6-12 months of bank statements. A good fraudster can effortlessly manage deposits for 3 months for the purpose of getting financing.
3. You can also run a search using an online service like OnCorp to see who the registered owner or officers of a company are – search the company name that was provided as the employer.

How about down payment fraud? Gift letters are the most common way that this type of fraud takes place. Thank goodness that CMHC and the bank are ok with accepting gift letters because without them many deals simply would not happen. Others will leverage a gift letter to hide that their down payment is borrowed money from another source or to hide that there is no down payment at all (perhaps the buyer and seller know each other and are working the system to their advantage). One way to uncover this type of fraud often is to ask the person who provides a gift letter to also provide ID and a bank statement showing that they actually have the money.

Being one step ahead of fraudsters by taking extra measures to identify them is step one to improving the mortgage industry and the cost of fraud to all. Purview For Mortgage Brokers has the tools to accomplish this. Call us today at 1.855.787.8439. 

Fraud Awareness Month – Who Is Committing Mortgage Fraud? We Ask You!

Are you able to tell when a fraud application has crossed your desk? Fraud related to mortgage financing is one of the most challenging things to identify – often because many professionals are guilty of committing it. Many believe their actions to be considered harmless - but they are not!

While Canadian stats regarding mortgage fraud can be a little more difficult to come by than finding stats south of the border, Canadian Mortgage Trends put out a great blog on mortgage fraud that highlights some startling statistics: http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2013/09/fighting-mortgage-fraud.html. Here are just a few:

• According to Equifax, mortgage fraud in Canada has increased by a staggering 50% in recent years.
• Fraud related to mortgages accounted for 13% of attempted fraud in 2011.
• Two thirds, equal to $400 million, was the estimated total of financial fraud in Canada.
• The blog also references a study done in the UK that found that many mortgage brokers were aware of factors that could indicate potential fraud – however only around 50% took extra measures to back up the information in question.

What identifiers are there?

• If a client tells you that they are self-employed but give you a paystub as though they are an employee – this could be fraud.
• If a client tells you that their spouse will sign on a deal but wants to bring the papers home and not allow you to meet the spouse – this could be a sign of fraud.
• If you have a deal that is tight – but if you beefed up the value by $10k, this is fraud….
• And the list goes on and on and on…

If you are committing fraud with eyes wide open, then helping you identify it is quite irrelevant. However, for those of you “helping” your clients get their deals through, you will do more business, build stronger relationships and be better reputed in your industry if you pass on those deals and employ due diligence measures to double check the information that your customers are providing.

At the very minimum, on a new application you should be making all best efforts to verify:

• the identity of your clients
• who is on title to the property
• mortgage history and registered mortgages
• value

If you validate these 4 things, every time, you will quickly catch problem deals – protecting yourself and your lenders and improving the industry as a whole.

Identify issues and validate information and help stop mortgage fraud. Purview For Mortgage Brokers has the tools. Call us today at 1.855.787.8439.

Fraud Awareness Month – Identifying Fraud Involving Property

Fraud involving property remains one of the most common forms of fraud that exists today in the mortgage industry. Some have speculated that this is because some who commit this type of fraud may see what they are doing as innocent or not as a form of fraud, when in fact it is and it has an impact to everything from the interest rates customers end up paying all the way to fees associated with mortgage standard charge terms. If it costs the lender, at the end of the day it will cost you and inevitably your client.

So what is fraud involving property? Fraud involving property includes things like:

• Over-valuating property - Sometimes the client overstates the value and in other instances the agent/broker has added to the value. Doing this intentionally is fraud. In instances where the person stating the value of the property simply says that they didn’t know, so they guestimated on the high side may move you into the grey, but this still costs the entire industry in the end. The best thing to do is back up what your client says their home is worth with an AVM. An AVM is basically an automated report that will tell you what the subject property is worth. AVMs compliment appraisals because they can identify an issue with a value far sooner, rather than after you, the client and appraiser have gone through the time and expense of viewing the property.

• Misrepresentation of characteristics - A blatant example would be someone who states that their property is larger than it is or possesses some characteristic that would make the property worth more than it is. Here is a common scenario: client says that they purchased their home 2 years ago for $200,000 but now it is worth $300,000 and it is not in a hot area. You ask how the property could have appreciated so. The client says that they did an extension adding square footage to the home and 2 extra bedrooms. They also added a second bathroom. In this instance, you would need to verify with a full appraisal. Now – if the client says they renovated and later goes on to say that the renovations consisted of painting and some landscaping, this is another instance where it makes a lot of sense to check out the value independently of the client. This occurs often in refinancing scenarios and could result in a lot of time and expense on all sides.

• Intent to reside is another huge one – if a client tells you that their property is a rental property or that they don’t reside at the property, this should be disclosed to the lender.

Preventing fraud involving property means being able to be aware of it. Automated tools have made it easier and more accessible than ever for brokers and agents to have more power when underwriting to uncover and prevent mortgage fraud.

Join the crusade to end mortgage fraud - we are all part of this quest. For more on identifying fraud involving property please call Purview For Mortgage Brokers today at 1.855.787.8439.

FAM - Purview Kicks off Fraud Awareness Month

This month, Purview kicks off Fraud Awareness Month. Every June, we will dedicate our social media to releasing useful information about how you can identify fraud – identifying fraud and becoming aware of fraud is your first step towards preventing and combating it.

The challenge with fraud in the mortgage industry is that it occurs every day and often folks committing it don’t even realize it is fraud.

This Law Society of Upper Canada study estimates that mortgage fraud alone costs lenders and insurers millions if not billions annually: http://www.lsuc.on.ca/media/convmar05mortgagefraud.pdf.

Reducing the trickle down cost/effect will mean working together to mitigate fraud by thoroughly educating ourselves about how we can identify it.

Does this mean calling 911 every time you are presented with a bogus paystub or a customer overstates a value? No. But at a minimum it enables you to pass on a deal that could be an issue for your lender and even make them aware of it so that they can protect themselves.

Look forward to many blogs covering different types of fraud and current resources and tools that are available to you.

Purview For Mortgage Brokers is committed to working towards a fraud free mortgage industry. Call us for more info: 1.855.787.8439.