Mortgage Fraud in Canada: Red Flags to Avoid

Mortgage fraud is a growing concern in Canada, affecting buyers, homeowners, lenders, and even innocent co-signers. With tighter lending rules and higher borrowing costs, fraud schemes have become more sophisticated. Knowing the warning signs can help protect your finances, your credit, and your home.

What Is Mortgage Fraud?

Mortgage fraud occurs when false or misleading information is used to obtain mortgage financing. This can involve income misrepresentation, false documents, identity theft, or inflated property values. Even borrowers who unknowingly participate can face serious legal and financial consequences.

Common Types of Mortgage Fraud in Canada

Income and Employment Fraud

Falsifying income, employment letters, or pay stubs to qualify for a larger mortgage is one of the most common forms of fraud.

Identity Theft

Fraudsters may use stolen identities to apply for mortgages, often targeting vacant properties or vulnerable homeowners.

Straw Buyer Schemes

A “straw buyer” uses their credit to purchase a property on behalf of someone else who cannot qualify, often without fully understanding the risks.

Appraisal Fraud

Property values may be inflated to secure larger loans, increasing risk for both borrower and lender.

Key Red Flags to Watch For

Be cautious if you encounter:

• Guarantees of mortgage approval regardless of credit or income

• Requests to lie or “adjust” information on applications

• Pressure to sign documents you don’t understand

• Unlicensed mortgage brokers or lenders

• Unexplained fees paid upfront in cash

If something feels rushed or secretive, it’s a warning sign.

Why Mortgage Fraud Is So Dangerous

Mortgage fraud can lead to:

• Mortgage default and foreclosure

• Credit score damage

• Legal action or criminal charges

• Loss of savings or home equity

Even accidental involvement can have lasting consequences.

How to Protect Yourself

To avoid mortgage fraud:

• Work only with licensed mortgage professionals

• Review all documents carefully

• Never provide false information

• Verify lender and broker credentials

• Ask questions and seek legal advice when unsure

Transparency is your best protection.

What to Do If You Suspect Fraud

If you believe you’ve encountered mortgage fraud:

• Stop the process immediately

• Do not sign further documents

• Report concerns to your lender or provincial regulator

• Seek legal and financial advice

Early action can prevent serious harm.

Final Thoughts

Mortgage fraud in Canada is a serious issue, but informed borrowers can avoid becoming victims. By recognizing red flags and working with trusted professionals, you can protect your home, your credit, and your financial future.