What Is The Penalty For Lying On A Mortgage Application In Canada?

penalty for lying on mortgage application in canada fraud

Are you thinking of starting a white lie in your mortgage application? Well, the advantage you’d get is not worth the risk! After all, mortgage applications have nothing as such as a white lie. Remember, if convicted, you might have to waste up to 14 years in prison while shelling out a fine of up to $ 1 million. Even if you are providing misinformation for a trivial reason, a lie remains a lie. 

While applying for a mortgage, you need to provide relevant details about your employment status, income, and the property you are interested in purchasing. Although you might get tempted to manipulate a few facts, it would be considered mortgage fraud. 

In this article, you will learn how you might end up lying in a mortgage application even if you don’t intend to. Learn more from the experts regarding the consequences of lying on a mortgage application. 

Detection Of Mortgage Frauds 

A statistic reveals that 13% of Canadians believe that telling a white lie is okay for mortgage applications for their home. Again, 16% reveal that mortgage fraud happens to be a victimless crime. 8% of the respondents admitted that they misinterpreted facts when they applied for loans or credit. 

The Canadian Bankers Association reveals that they have several strategies to prevent such fraud. Here are some of the intelligent methods that can land you in conviction. 

● Advanced algorithms, backed by neural networks, help fraud management teams detect suspicious activities. 

● Dedicated members of the salesforce of the bank or adjudication groups scan through the customer documents to find falsified information. 

● Fraud experts associated with the banks investigate issues on the instance of fraud detection. 

● During the approval of a mortgage application, the insurers ensure additional vigilance. 

● At times, banks get a tip-off from someone regarding fraudulent information. 

Once the banks detect fraudulent activity, they would get in touch with the homeowner. The banks also share the information regarding scams and fraudsters even while they respect their confidentiality. 

Common Mortgage Fraud Examples 

In most cases, borrowers commit mortgage frauds through misinterpretation of information. The reason is, if they had provided accurate information, they would not have received the mortgage. Here are six common types of mortgage frauds that you should be aware of. 

● Income Fraud 

In this case, borrowers tend to inflate their income when they approach a lender. They believe that this increases their chances of getting approved for the loan. Creditors habitually look for a higher purchasing power for the borrowers. The latter takes advantage of this approach and reports falsified income. 

● Occupancy Fraud 

Occupancy fraud occurs when a property buyer states that they would be personally residing in the house. However, after purchasing the property, they tend to rent or lease it off. This is fraud, as many programs of mortgage are designed only for providing primary residences. Besides, investment property mortgages prove to be more expensive, and the borrowers need to shell out a higher interest rate. 

● Employment Fraud 

Sometimes, borrowers provide wrong information in the mortgage application regarding their employment history. This implies that the borrower might put forward the name of an organization they never worked for. Creditors provide loans to individuals with steady income or employment. When they underwrite a loan, they tend to verify the career history of the borrowers. Employment frauds also include misinterpreting the form of employment. For example, people working part-time may project themselves as full-time employees. 

● Down Payment Fraud 

Many times, borrowers provide false information regarding the source from where they would make the down payment. In these cases, creditors might process the mortgage for a price that has been made artificially high. 

Often, people do not have adequate money to make the down payment. So instead, they claim that someone has gifted them the property. This might also involve real estate builders, who strive to sell the homes by assisting with down payments to homeowners who would not disclose the same. 

● Straw Borrower Fraud 

A straw borrower fraud involves a person different from the one residing in the home which applies for the mortgage. For example, if a bank denies a loan, they might reach out to parents to apply for them. If the parents claim that they would be personally residing in the home, it turns out to be a fraud. 

● Illegal Flipping Of Property 

This is a kind of mortgage fraud, where a person purchases a property and sells it off quickly after hiking the price and submitting a false appraisal. Then, the lender would issue a mortgage on the increased price, while the profits go to the fraudsters. 

Consequences Of Lying On A Mortgage Application 

There’s nothing wrong with making a typing mistake when you apply for a mortgage. You can always get it corrected by contacting your creditor. However, intentionally manipulating situations to your favour can invite hefty fines, foreclosure, criminal charges, and even imprisonment. 

● Foreclosure

If the lender discovers that you have misinterpreted information, it might lead to foreclosure. In this case, you would have to pay off the balance amount immediately. 

● Fines

Fines can be heavy enough to lead to financial drainage, where fraudsters may have to pay up to $1 million. 

● Imprisonment

You might be imprisoned for up to 14 years if you are convicted of mortgage fraud. 

● Civil Penalties

Mortgage frauds can land you in legal hassles, including criminal and civil penalties. 

Endnote On Canadian Mortgage Fraud Penalties

It’s worth mentioning that creditors are smarter than most borrowers think and have plenty of experience dealing with potential fraudulent activities when applying for a mortgage. In addition to this experience, advancing technology has also made it much easier to detect when fraud may be in play. Once caught and convicted in Canada, you’d be dealing with severe consequences and reputational loss. 

Often, first-time Canadian homeowners unintentionally commit mistakes while providing information. Therefore, it would be wise to reach out to one of the experts for professional advice to ensure that you’re reporting all of the necessary information in the correct manner. This way, you can be on the right track and stay away from legal hassles.

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