If there was a way to record the ethnicity of those with the propensity to lie on their mortgage application, it would be really revealing, but the fact that up to 13 percent of Canadians would be comfortable with lying to get mortgage approval can have serious consequences in the event of an economic downturn.
But with housing moving out of affordability range in Toronto, Vancouver and nearby cities, there is even more pressure to fib a bit if the ultimate prize is big enough like a house.
A 2017 survey from credit rating agency Equifax found 13 per cent of Canadians say it’s okay to tell a little lie on your mortgage application. Fully 16 per cent believed mortgage fraud is a “victimless crime.”
And plenty of people are acting on this ethos. Equifax found a 52-per-cent spike in what they term “suspicious mortgages” between 2013 and 2016. A majority of the increase happened in the provinces with the priciest markets — Ontario, with two-thirds of all suspicious mortgages, and British Columbia, with 12 per cent.
To understand the scale of this problem, Canada Mortgage and Housing Corp. compared incomes reported on mortgage applications to incomes reported with Canada Revenue Agency and found that mortgage incomes are systematically higher than incomes reported to CRA, according to a report at the Financial Post.
The researchers found that increases in house prices were linked to an increase in the incidence of “possible income misstatement.” They also found a correlation between this sort of fraud and higher default rates on mortgages.
According to documents obtained by Reuters, the federal housing agency has asked the CRA to take a “more direct and formal role” in verifying incomes.
Unlike in the U.S. and U.K., Canada’s tax agency doesn’t confirm incomes of mortgage applicants, even if applicants agree to it. The CRA told the news agency it’s now “exploring different avenues” for securely sharing income data with lenders.
No wonder the Bank for International Settlements has repeatedly named our country as a top candidate for a banking crisis.
Verifying one’s income with the one reported to CRA could really make people think twice before adding that extra income. -CINEWS