As assets go, you would think real estate is uniquely resistant to theft. After all, it’s not like cash or a vehicle; no one can run off with it. But real estate can be leveraged for financial gain. That’s why Canadians have to contend with crimes such as mortgage fraud and title fraud. Here’s how they work, and how to protect yourself.
Mortgage fraud in Canada
The most common form of mortgage fraud in Canada is what’s called first-party fraud: A mortgage applicant misrepresents aspects of their financial affairs when they apply—for example, by claiming a higher income than they really earn or by failing to disclose debts.
“They’re not pretending to be someone else,” says Carl Davies, head of fraud and identity at Equifax Canada. And the targets of first-party mortgage fraud are lenders, not consumers. Still, Canadians as a whole suffer as a result, as the costs of first-party fraud get passed on to them through higher financing costs.
What Canadian consumers need to watch out for and protect themselves against, however, is third-party mortgage and title fraud. This is when a fraudster pretends to be you in order to apply for a loan in your name, using your home as collateral. They could also assume the title of your home so they can re-mortgage or sell it—even without you knowing.
This crime can have serious consequences for your finances now and into the future. You may face claims from lenders to service or repay funds borrowed. The impact on your financial identity can harm your credit score and affect your ability to obtain credit. Cleaning up the aftermath of fraud with financial institutions and law enforcement takes time and effort. It may take months or years to get your financial health back on track.
How mortgage fraud happens
Protecting yourself against mortgage and title fraud begins with understanding how it typically unfolds.
“Identity theft is usually the precursor to this kind of fraud,” Davies says, which explains why mortgage fraud is becoming a bigger concern in this digital age. “The ability for people to commit identity theft now is easier than it has ever been.”
The advent of generative AI has enabled fraudsters to convincingly falsify or create fraudulent documents, and even impersonate property owners with deepfake audio and video. And because mortgages represent one of the largest sums of money any of us ever have access to, it’s a leading way for criminals to profit from identity theft.
