Being in the mortgage industry for the last 25 years was a fantastic career decision for me, and my family. Growing up in Hamilton and working in the city has blessed me many times over. I am glad that I kept my ethics intact.
Giving low mortgage rates is wonderful but sometimes saying No to clients was another way I helped them in the long run. As house prices go higher and government rules encroach on mortgage approvals, fraud has now become a major issue. Not in my world. I have seen fraud neatly prepared for an unsuspecting lender delivered in many brilliant forms over the years. Below I will share the schemes used during my times in the mortgage industry.
When I first started in the mortgage business in Hamilton, I was one of the first 3 road reps working for a company called Montreal Trust. Can you believe that not only was I a mortgage provider but I was the appraiser as well? Can you imagine that today! Some of my colleagues who have the same position were making easy money scamming the system. Here is how it works. A true value of a home would be $175,000. The mortgage rep would appraise the home at $200,000 so the borrower could get extra funds. Then the borrower would kick back funds to the mortgage representative for providing the extra funds. A good plan until values stop going up.
The next phase of mortgage fraud was where a realtor, appraiser and lawyer would work together. They would purchase homes for example $100,000, paint and clean them up and then sell them to some unsuspecting purchaser for $150,000. The fix would be in because now the appraiser has given his paperwork for the much inflated purchase price. The unsuspecting bank provides the funds for the mortgage and the real estate agent, appraiser and lawyer share the profits. Unfortunately when the vendor goes to sell their respective home, they are left holding the bag along with the Bank since there is no equity.
The latest fraud includes many mortgage brokers. For a fee they will prepare legitimate looking fake documents that include job letters, pay stubs and financial statements. The brokers know exactly what these financial institutions are seeking and they have the ability to make, especially, self-employed clients look better. It happened in our office where a painter was delivered the bad news where we could not approve him. He saw a broker in Toronto where for $2,500 his documents would be fixed. The scary point is that the painter could not really afford the mortgage.
What can we do to reduce these frauds? Here is a suggestion; we should not allow mortgage agents to continue if they are caught. They should be suspended permanently and arrested. As well we should have better hiring standards with background checks. Standard intense training and penalties to the brokerages that hire these agents should be mandatory.
My big worry is frauds occur at the top of markets. When real estate is hot and prices are escalating like in Hamilton. It’s a sign that fraudsters come out to take advantage of. I am glad I can keep my head high in Hamilton by doing what was right for the client. Saying No to clients is my way of saying this will cause great stress if pursued. I hope I helped many families with my denial of their financing.