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A recent Equifax survey of Canadian consumers shows 40% feel that mortgage fraud is a growing problem. Even more unsettling is that 9% admit to not having been entirely truthful on their loan applications, and a similar number believe it’s acceptable to falsely report a higher income when applying for a mortgage. 


That said, the majority (73%) declared they’re being more vigilant with their online transactions and 34% have been reviewing their financial statements more closely for signs of fraudulent activity. While taking precautions to avoid becoming a victim is a step in the right direction, it’s also important to understand that, when applying for a mortgage, your homebuying team of professionals needs to be just as vigilant. 


What’s mortgage fraud?

Mortgage fraud is defined as someone deliberately misrepresenting information, usually pertaining to income, employment or identification, or relating to the property itself. There’s an alarming rise in sophisticated and deceptive practices, which are becoming not only harder to detect, but also more common. 


For many would-be buyers, housing affordability continues to be a major concern and the COVID-19 pandemic has exacerbated an already-heated situation. Personal financial instabilities combined with elevated home prices are leading to an increase in deceitful practices in the quest of securing a mortgage.


Ensuring the accuracy and validity of documentation through fraud prevention best practices and proper due diligence has become increasingly critical. Here are some irregularities, misrepresentations and falsifications for which mortgage professionals must have a keen eye to detect.


Common Red Flags


  • Overly generic job title
  • Unusual employer address
  • Company name doesn’t appear on pay stub; inability to contact employer 
  • Employer name is similar to someone involved in mortgage transaction
  • Evidence of redactions or alterations on employment verification documents



  • Informal or handwritten paystubs
  • Income appears out of line with type of employment
  • Evidence of abnormalities; tampering in paycheque numbering
  • Applicant reports substantial income but can’t account for it
  • Social insurance number isn’t consistent on paystub and mortgage application

Personal Identification 

  • Use of initials or partial names
  • Photo identification is blurred or unclear
  • Tax returns not signed or dated
  • Address discrepancies within mortgage application 
  • Invalid social insurance number or variations 


Credit Report

  • Length of credit history inconsistent with borrower’s age 
  • Credit patterns inconsistent with income and lifestyle
  • Numerous or unusual amount of recent enquiries
  • Liabilities on credit report don’t appear on mortgage application
  • Significant differences between one credit report enquiry to the next


  • Appraisal ordered by party related to mortgage transaction
  • Purchase price substantially lower or higher than market value
  • Comparable sales aren’t current or within subject property vicinity
  • Address reflected in photos doesn’t match property 
  • Appraisal dated before sales contract issued

Property Title

  • Seller’s name isn’t on title
  • Seller has owned property for very short period 
  • Buyer has pre-existing financial interest in property
  • Non-arm’s length relationship identified but not disclosed
  • Delinquent property taxes

Financial Documentation

  • Unusual or unaccountable source of down payment
  • Borrower doesn’t use traditional banking institutions
  • Irregularities within bank statements; suspicious withdrawals; account number discrepancies 
  • Bank statements don’t reflect deposits consistent with income
  • Current assets don’t indicate presence of sufficient cash to close transaction



  • Borrower or seller names don’t match those listed on mortgage contract
  • Actual sale price inconsistent with mortgage contract, loan approval and/or appraisal
  • Evidence of payouts to unknown parties
  • Excessive sales commissions
  • Cash proceeds to borrower inconsistent with final application and loan approval

Misstating facts or providing false information on a mortgage application can have serious consequences and legal implications. Mortgage agents can have their licence suspended or revoked completely for not identifying red flags or heeding warnings, federally-regulated lenders may be found in breach of mandated practices and procedures for failing to report fraudulent or illegal activities and buyers could not only be denied their mortgage, but also face hefty fines or even jail time.


Have questions about mortgage fraud or due diligence to prevent fraud? Answers are a call or email away!