With fraudsters using increasingly complex ways to submit fraudulent applications, here’s what all mortgage professionals should know
Canadian mortgage borrowers have had their fair share of hurdles to overcome this year, from tariff turmoil to stubbornly high interest rates and affordability challenges – but fears about mortgage fraud are also as persistent as ever.
Fifty-eight percent (58%) of Canadians remain concerned about mortgage fraud in 2025, according to a September survey by Pollara Strategic Insights on behalf of Mortgage Professionals Canada (MPC) and The Mortgage and Title Insurance Industry Association of Canada (MTIIAC).
The poll also showed widespread support for allowing lenders and brokers to directly confirm income information with the Canada Revenue Agency (CRA), and reflected the view among Canadians that mortgage fraud drives up home prices and disadvantages honest buyers.
For brokers, the challenge of detecting and reporting mortgage fraud is easier said than done, particularly with fraudsters able to rely on an ever-growing array of tools to submit false applications that appear credible.
And there are certain warning signs to look out for that have become increasingly prominent in recent years, according to Scotiabank director, mortgage security Doug Robinson.
He told an audience at last month’s MPC conference in Ottawa that lenders were increasingly focused on how mortgage applicants presented their income – and the possibility that consistent biweekly payments have been set up purely for the purpose of falsifying an application.
David Clarke of TMG The Mortgage Group says AI is changing mortgage brokering, but human expertise remains irreplaceable. Tools can handle routine tasks, while brokers continue to guide clients through complex, personalised decisions.https://t.co/rxyzd5pmeB
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 11, 2025
That happens when an applicant starts getting deposits into their bank account to look like legitimate salaried payments from their employer.
But those payments will often end as soon as the mortgage application is finished, usually followed by a refund in the following weeks of all the money that was paid to the individual by their so-called “employer.”
Banks in the A space can share information through the Canadian Bankers Association to check with each other whether applications submitted are correct. “So Scotiabank gets a BMO bank statement – we can go to BMO and ask them, ‘Hey, is this real?’ And if it’s staged income, they’ll come back and say it’s real because those deposits have happened and they’ve set it up for three months,” Robinson said.
Tax forms under increasing lender scrutiny
Another way to check for potential fraud is by double-checking tax forms. Many banks now call listed tax preparers on a borrower’s documents and ask if the applicant is actually their customer. “You’d be surprised in general in the industry,” Robinson said. “There’s probably more fraud with self-employed income applicants than salaried.”
If the documents show that a fee was paid for tax form preparation but there’s no accountant’s name listed, he added, “the best practice is to go back to them and just ask them to provide you a letter from the accountant or a new T-1 General with the accountant’s name attached to it. This will really help on your submission to the lenders.”
Downpayment fraud a constant – and evolving – concern
Unsurprisingly, downpayment fraud is also increasingly commonplace – and one of the biggest trends lenders are looking out for.
For brokers, Robinson outlined a “trifecta” of questions to consider in an application before submitting to lenders: How did the person get the money for their downpayment, where is it resting, and does it make sense that they have it?
Sending a clear reasonability statement to lenders outlining why the downpayment makes sense is an important step for brokers – and they should also be alert to sudden changes in a borrower’s application.
That could be if a downpayment is initially declared as a gift from friends or family, but changed when a lender asks for proof or verification from the gifting individual.
“And also, where’s the bank statement that shows the $80,000 or $200,000 in the account?” Robinson said. “If it’s like, ‘[The borrower] had a GIC and cashed in the GIC, and you get a bank statement and on October 3 it shows $200,000 being dropped into that account, we need to know the backup of that money.”
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