Many Canadians are surprisingly comfortable telling strangers they approve of mortgage fraud. Equifax released its latest consumer survey along with upgrades to its ClearPro fraud detection platform. The company confirmed what many have suspected — credit fraud may be rampant. It didn’t take sophisticated software to figure that out either. That was just the result of people suggesting they approved of fraud, or outright committed it, to survey takers.
Using Software To Identify Applicant and Industry Fraud
The new product upgrades aims to make it easier for lenders to determine when fraud is being committed. Beyond applicant credit checks, it will now verify broker and agent entry information. Ideally this will help to weed out industry facilitated fraud, or at least deter it. An increasing problem, as more people openly view mortgage fraud as a can’t lose situation in Canada.
The product will also search global media and sanctions lists, to curb globe trotting fraudsters. No more, “whoops! We didn’t know they were on the front page of a foreign newspaper for robbing taxpayers, and fleeing to Canada.” Well, I’m sure it’ll still happen, but at least the lender will have a flag on the file.
Equifax Expanding Fraud Detection Tools
The product upgrades come after Equifax has consistently found Canadians openly endorse mortgage fraud. Last month’s survey found 16% of Millennials think it’s acceptable to inflate their income on an application. The general rate for the whole population was 9%. The agency also found 11% of people think mortgage fraud is a victimless crime, where all parties are winners.
The numbers are bad, but it’s an improvement from a couple of years ago. In 2019, a similar Equifax survey found 23% of Millennials were okay with inflating income. This number was 12% for the general population. It’s a big improvement, but it really highlights how much Canadians approve of fraud. Canada had to work its way up to 1 in 10 people thinking it’s okay to commit mortgage fraud.
A higher rate for Millennials is more likely due to the fact many may need to lie to get a mortgage these days. Older demographics, especially those that bought when housing was more closely tied to income, are less likely to need to consider it. That said, this is only people that indicated they were okay with it on a survey. Most people ready to loot a bank, don’t take a survey indicating they will.
1 In 7 Millennials Indicated They Lied On A Credit Application
Lying to get credit is apparently a national pastime in Canada. The survey found 14% of Millennials indicated they lied on a credit application. The national total rate was 7%, meaning Millennials were twice as likely. Well, at least twice as likely to admit on a survey they lied on a credit application.
Fraud is difficult to identify, and there’s little motivation to do so in a strong economy. That also tends to be the period when people are more likely to commit mortgage fraud. If borrowers perceive the risk of not getting the credit (and missing sweet price gains) is worse than the risk of being caught for fraud, they’ll try to commit the fraud.
Mortgage fraud also has an impact on real estate prices that isn’t often discussed. Borrowers that commit minor fraud like lying about income, increase leverage. This would have the same impact as lowering interest rates for a segment.
All of a sudden, you have future demand pulled forward. It wasn’t thought to be significant enough to impact prices, but marginal buyers can distort markets at low volumes. That said, one in ten people openly admitting they’re okay with mortgage fraud, may mean it isn’t that small of a number.
For lenders, this isn’t problematic until it is. Finding out a borrower committed fraud isn’t an issue if the borrower pays their bills. It’s when an economic shock occurs, they find out which borrowers perform. Luckily, sometimes a government will let banks just forget about collecting bills.
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