Can you tell me what “mortgage fraud” is?

This question is timely: March is Fraud Prevention Month, a nationally-recognized month that gives consumer-protection organizations like RECO an opportunity to raise awareness about this crime so that consumers can avoid becoming victims.

Mortgage fraud, sometimes referred to as value fraud, can be a complicated and confusing crime. Its impact on victims can be devastating, so it’s wise to understand some basic facts so that you can prevent it from happening to you.

Circumstances can differ, but mortgage fraud basically boils down to someone tricking a financial institution into lending money when it otherwise wouldn’t (or more money than it otherwise would). It may be perpetrated by an individual or by a team of fraudsters working together. While banks and lenders have risk-management processes in place, this type of fraud still takes place.

Sometimes the scam is purely about making a profit for a fraudster; sometimes it’s an effort by someone to buy a house they can’t really afford.

The lender is not the only victim in this scenario. Society pays in a number of ways, such as through increased insurance costs due to the payouts by the mortgage insurers; through higher lending charges as lenders absorb extra costs in administering defaults on mortgages; and, through increased costs for enforcement agencies that have additional stress placed on their resources.

Individuals are also affected. As a victim of mortgage fraud, you could end up with a home you don’t really want, a mortgage you can’t afford and/or a damaged credit rating.

The key is to not get pulled into this sort of scam, and to report it when you see it. Remember: if “the deal” sounds too good to be true, it probably is.

If someone is trying to get you to complete a real estate deal through dishonest means, or without giving you the information you need to make a decision, do not proceed. Here are some important tips:

    • Never sign a blank document – or any document for that matter – without taking the time to understand what it means. If you’re unsure about a document, seek advice from your own lawyer.
    • Never allow someone else to use your name and credit information in exchange for payment. People have been tricked into co-signing a mortgage for a stranger or an acquaintance or “lending” their name and information in exchange for a few thousand dollars. In the end, they were on the hook for all the mortgage payments.
    • Never falsify information on an application for a mortgage. Unscrupulous individuals involved in the transaction may ask you to falsify your employment information, including overstating your income, for example by  offering to provide a false employment letter, pay stubs or T4 form, to get a mortgage that you wouldn’t otherwise qualify for, or that you can’t really afford.
    • Never get involved in a real estate transaction where the purchase price is notably higher than comparable properties in the neighbourhood and the buyer is aware the reported price is artificially high. This may occur because there is some kind of side arrangement to get cash back, which can be an amount that is equal to all or part of the down payment. This is called value fraud.

Where a fraud involves the conduct of a real estate professional, either as a knowing participant or as an unwitting victim, RECO can investigate, take appropriate action within its jurisdiction and will work with law enforcement authorities.

If you find yourself in this situation, contact your local police department and file a complaint with us. You can find the complaint form here.

Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at, follow on Twitter @RECOhelps or on YouTube at

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