Fake employment records, bank statements and T4’s offered to would-be homebuyers
As interest rates rise, qualifying for a mortgage is getting harder for buyers, but that isn't stopping some real estate agents from making a sale. An undercover investigation by CBC Marketplace has exposed some networks of real estate agents, mortgage brokers and bank employees facilitating mortgage fraud for a fee.
They are recorded on hidden camera offering to connect buyers with fabricated documents showing fake employment, salaries and tax filings, so buyers can obtain loans they would not otherwise qualify for.
It's a lucrative business. Real estate agents say the teams charge one per cent of the mortgage amount for the fabricated mortgage application. This is in addition to other commissions that can be earned once the sale is finalized.
On the sale of a $637,673 home, the average sale price in Canada, a real estate agent would typically make $16,000 to $32,000 in commission, while the mortgage agent could earn upward of $2,550 in commission from a lender.
- Watch the full investigation tonight at 8 p.m. (8:30 NT) on CBC-TV or stream anytime on CBC Gem.
While some consumers actively seek out and participate in this fraud, Marketplace has learned that some real estate agents are also taking advantage of unwitting buyers. Newcomers are particularly at risk, as they may not fully understand the home-purchasing process. New Canadians are also less likely to immediately qualify for a mortgage at one of Canada's big banks, as their employment and credit history in Canada is more likely to be limited.
Experts in law and financial crimes say what Marketplace has uncovered is illegal under the Real Business Brokers Act and the Mortgage Brokerages, Lenders and Administrators Act. Submitting a fraudulent mortgage application is also a violation of Canada's Criminal Code.
Consequences for buyers and the market
This crime also has repercussions for Canadians as a whole, says Dan Eisner, CEO of True North Mortgage.
"As interest rates rise and house prices drop, these buyers are most likely to default on their payments and that can put further downward pressure on the housing market through panic sales," he said.
True North Mortgage has detected and stopped multiple fraudulent applications submitted to the company, along with counterfeit tax and employment documentation such as T4s and letters of employment that reference fake company names and phone numbers, where a real person will pick up and a real website exists.
As home prices continue to plummet, these buyers are at greater risk, Eisner says.
"If people obtain mortgages fraudulently and they thought their backup plan was to sell the house if I can't afford it, that backup plan's disappearing. It also keeps honest people out of the market as they compete for various homes."
The Real Estate Council of Ontario (RECO) would not talk to Marketplace on camera about the findings of the investigation.
In a statement, RECO's registrar Joseph Richer wrote: "Agents should expect to be prosecuted if they engage in mortgage fraud."
For real estate agents, falsifying mortgage information or assisting in the falsifying of information can result in fines up to $50,000, prison for up to two years, or suspension or revocation of the agent's licence.
In the past five years, RECO says it has disciplined seven real estate agents or brokers and laid charges under the Provincial Offences Act against several others.
Mortgage fraud is a growing problem, according to Carl Davies, head of fraud and identity at Equifax Canada. The credit bureau flags between 15,000 and 24,000 suspicious mortgage applications each month, for lenders.
"Sixty-seven per cent of the applications that we find, or are tagged by our members as fraudulent, are actually related to that kind of misrepresentation," he said. "It's by far and away the biggest indicator of fraud or biggest risk of fraud we see in that space today. "
Marketplace staff posed as homebuyers with hidden cameras
To understand where mortgage fraud often starts, two Marketplace employees went undercover with hidden cameras, posing as new Canadians looking to purchase their first home.
The pair visited 10 properties for sale by real estate agents or brokerages where previous research indicated fraud may be taking place.
Marketplace's undercover buyers told each agent that they had enough money for a 20 per cent down payment, but were unsure about their eligibility for a mortgage since one of them had an undeclared cash income. This factor alone would disqualify them for a mortgage at Canada's big banks.
The agents all recognized the couple would not qualify for the mortgage needed to purchase the home, but six out of 10 went on to offer to facilitate mortgage fraud by connecting the couple with counterfeit documents and brokers who would submit the application on their behalf.
"Income is not an issue," said one real estate agent while showing documents he was working on for other clients. "This is what we turn into their income. Even if you are making zero dollars, even if you are a housewife, we can make the income. The only thing we cannot make is credit."
"You know, by books, you will not qualify," said another agent, who went on to describe how his contacts could help. "They will do some documentation showing that you guys are making more and they will get you what you want. But they cannot openly say it out in public because that's not true."
"They will make a T4, they will make like she is on the payroll, they will use any company's payroll and put their name onto that, right," said a third.
Three of the six real estate agents caught offering to facilitate mortgage fraud work for HomeLife Miracle Realty Ltd., which has five brokerages across the Greater Toronto Area and one in Cambridge, Ont. Marketplace has also spoken with several buyers who say agents working for the same brokerage pushed them toward fraudulent mortgage applications or submitted one without their knowledge.
When reached for comment, the agents documented on hidden camera either didn't respond or told Marketplace they refer clients to legitimate brokers but don't deal in mortgages themselves.
Ajay Shah, the broker of record for HomeLife Miracle Realty Ltd., said he does not condone the behaviour Marketplace told him it captured on camera, and said the three agents documented represent just a fraction of their sales and the 3,000 agents working under his supervision.
If shown evidence of wrongdoing, Shah said he would act but ultimately opted not to participate in an on-camera interview and did not view the footage.
"Of course, the maximum I can do is fire them because I'm not the authority to take the licences away from these [agents]. That only RECO can do," Shah said.
Industry needs better oversight, expert says
Forensic accountant Jennifer Fiddian-Green says these findings are an indication the real estate industry needs better oversight.
"We need the regulatory bodies to monitor more and go in and do practice inspections, all of that," she said. "We need our people on the front lines to be alert and agile so that we can respond."
Mortgage broker Sanjeet Mand agrees that a lack of enforcement is allowing this crime to flourish in the real estate and mortgage industry.
"I think it's insidious," he said. "I think we need to get these people out of this business."
Mand said he has lost out on referrals when some real estate agents have told him they only work with brokers willing to provide fake documents and fraudulent applications.
"Anytime you talk to someone it's like, 'Oh, can you make me documents?' It shoots our credibility."
To test how often mortgage agents will provide false documents without a referral from a real estate agent, Marketplace producers also cold-called 25 mortgage brokers or agents in five hot real estate markets across the country including the Greater Vancouver area, Calgary, Edmonton, the Greater Toronto Area and Montreal. The majority of mortgage agents said they would not help with a fraudulent mortgage application, but nearly one in five said they would.
"My team will ask for $3,000 and I charge one per cent of the mortgage amount," said one mortgage agent, offering to help with the fraud.
In Ontario, the Financial Services Regulatory Authority (FSRA) is responsible for disciplining mortgage agents. It says the brokers in this scenario would be considered in violation of the Mortgage Brokerages, Lenders and Administrators Act, which prohibits agents from facilitating dishonesty, fraud, crime or illegal conduct.
In a statement, the FSRA said: "A mortgage broker or agent shall not act, or do anything or omit to do anything, in circumstances where he or she ought to know that by acting, doing the thing or omitting to do the thing, he or she is being used by a borrower, lender, investor or any other person to facilitate dishonesty, fraud, crime or illegal conduct."
Mortgage fraud pushed through at Canada's big banks
Marketplace's investigation has also found that fraudulent mortgage applications supported by fake employment and tax documents are being pushed through by individuals working at Canada's biggest banks.
"You will get the bank rate, you will get everything from the bank," said one real estate agent in response to a question about where the fraudulent mortgage would come from.
"There are three or four [people] who are my own guys, right? This is not their first time or their third time doing this. They are in with the banks. They find some alternatives for even the underwriters."
Fiddian-Green says banks need to take the blinders off and be more vigilant in their verification process.
"Let's look at those documents and do some due diligence to make sure that they're bona fide. It doesn't take too long to look at an occupation, look at the employer, make a phone call, do a Google search and find out that there are problems."
Eisner of True North Mortgage says his company calls every employer on the applications but many other lenders don't.
"I guess they look at their portfolio and say, 'Well OK, maybe some percentage is fraudulent,' and they're OK with that."
'There's no one to turn to'
While the consequences of this crime rarely fall on the perpetrators, it can have devastating impacts on would-be homebuyers.
Chris and Bibi Harding, who immigrated from Guyana in 2021, were shocked when they discovered that a Scotiabank employee submitted a fraudulent mortgage application on their behalf.
"All our information had been altered,'' said Bibi, recalling the day she went into the branch to provide her social insurance number and learned that fake employment information was connected to her and her husband's accounts.
Their employment profiles, which the branch teller printed out for them, indicated that Chris works as an operations manager for a hardwood flooring company. The same profile claims Bibi works for a tax company.
Neither are true. Chris runs businesses in his home country from Canada and has not been employed since arriving in the GTA. Bibi had only ever worked at an elementary school.
In hindsight, the Hardings believe the Scotiabank home financing adviser they used for their mortgage application submitted false employment information under the direction of their real estate agent.
"She indicated that she was given my contact information by the realtor, and she would be able to get us the loan through Scotia," said Chris.
The Scotiabank employee requested $5,000 to set up profiles for the mortgage application. The Hardings say they sent the money, believing it to be a legitimate fee.
After discovering the fraud, the Hardings complained to Scotiabank but then received a letter directing them to close their accounts immediately.
"I was thinking at this point, 'OK, you come to Canada hoping to get a better [life] and everybody is just taking advantage of you.' There's no one to turn to that will actually represent you and say, 'Hey, this is not how things are done here.'"
Scotiabank told Marketplace it takes accusations of fraud seriously and has since returned $5,000 to the Hardings and reinstated their accounts. It also says the employee who handled their mortgage application no longer works at Scotiabank.
The banks need to be a player in the response to mortgage fraud as well, says Fiddian-Green.
"We need to get better at working together to be really specific and get at this kind of activity and shut it down, and share, share this so that people can see what's happening, and know how to spot it early."
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