Mortgage fraud hits 'eye-opening' level in Canada

Consumer credit company Equifax uncovered roughly $400 million worth of mortgage fraud in Canada last year, an "eye-opening" number industry experts estimate represents only a fraction of the cheating taking place in the country's real-estate market.

Atlanta-based Equifax says many financial institutions are tightening lending and as a result, deceit in the property market is rising. According to a report the company released Tuesday, two-thirds of all the fraud it sniffed out last year was real-estate related.

"Mortgages are the biggest bang for the buck," said John Russo, vice-president and legal counsel for Equifax Canada Inc. "So when credit gets tougher to get, that leads to more people falsifying documents, giving false pay stubs, inflating their income, kind of fudging things to get a home."

The $400 million in mortgage fraud represents only a sliver of the roughly $1 trillion in total residential mortgage credit outstanding at the moment in Canada.

But it rose sharply in 2011 from 2010 in dollar terms, increasing 150 per cent, according to Equifax data.

The figure is "eye-opening," Russo says, because that's just the amount Equifax flushed out on its own for its clients. "There's a lot more out there that just goes under the radar and is not seen and not caught."

Often tracking strong housing markets, mortgage fraud occurs nationally but is more concentrated in large urban areas in Quebec, Ontario, Albert and B.C., according to the Criminal Intelligence Ser-vice Canada, a federal agency which shares intelligence between police forces.

Numerous criminal groups across Canada are involved in a wide range of mortgage frauds at varying levels, the CISC says, sometimes with the help of industry insiders such as property agents, mortgage brokers and lawyers.

One growing trend is people setting up fictitious identities, building up credit for those fake people and then using the credit to borrow.

Equifax says that five years ago, it had identified 300 such fictitious identities in its national database. Now there are over 2,500.

Using mortgage fraud to further other criminal activity is also common. Criminals are buying properties to open marijuana-growing operations, to trade drugs and to launder money. 

An increasing number are getting caught and there's been a dramatic increase in criminal and civil forfeiture cases as a result, said Andrew Bury, a lawyer specializing in loan-security enforcement at Gowling Lafleur Henderson LLP in Vancouver

.

"They're grabbing these properties left, right and centre. And over and over again they're crashing into the mortgage companies, the banks, [who are saying] 'Wait a second, we have a mortgage on that property.'" Lenders are losing big sums while governments reap the rewards of the seizures, Bury said.