Equifax uncovered roughly $400 million worth of mortgage fraud in Canada in 2011, a number industry experts believe represents only a fraction of the amount occurring in the country's real-estate market.
The Atlanta-based credit reporting agency says that deceit in the real-estate market is rising because many financial institutions are tightening lending. According to a company report, two-thirds of all the fraud revealed last year was real-estate related.
One trend involves individuals setting up false identities, building up credit under those names and then using the credit to borrow. Equifax says that five years ago, it had identified 300 such fictitious identities in its national database. Now there are more than 2,500. Using mortgage fraud to further other criminal activity also is common. Criminals are buying properties to open marijuana growing operations, to trade drugs and to launder money, Canadian law enforcement officials have said.
John Russo, vice president and legal counsel for Equifax Canada Inc., says mortgages are the biggest "bang for the buck. So when credit gets tougher to get, that leads to more people falsifying documents, giving false pay stubs, inflating their income, kind of fudging things to get a home."
The $400 million in mortgage fraud is just a small portion of the estimated $1 trillion in total residential mortgage credit outstanding at the moment in Canada. But the dollar figure rose sharply last year from 2010, increasing 150%, according to Equifax. The figure is "eye-opening," Russo says, because that's just the amount Equifax flushed out on its own for its clients.
The bulk of mortgage swindling involves individuals lying to obtain mortgages larger than their income can support, according to Equifax. They're living in homes that are simply too rich for them. Says Russo: "No matter how small or big the lie, it's still mortgage fraud."
Canada's highest-profile mortgage fraud to date is perhaps the case of Martin Wirick, a Vancouver lawyer sentenced to seven years in prison in 2009 for fraud and forgery in an elaborate scheme covering 107 separate real estate deals conducted on behalf of his client, real estate developer Tarsem Singh Gill.
The scheme was so huge that the Law Society of B.C. raised special contributions from its lawyer members to compensate the victims. As of 2009, it had paid out $38.4 million for the Wirick fraud alone.