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Mortgage Fraud & Organized Crime in Canada

Mortgage Fraud & Organized Crime in Canada PDF logo


The purpose of this assessment is to outline how mortgage fraud occurs and examine the nature and scope of organized crime’s involvement in this fraud type in Canada.


According to industry estimates, losses from mortgage fraud in Canada range into the hundreds of millions of dollars annually. Some criminal groups are each responsible for losses, primarily to financial institutions, of tens of millions of dollars. Mortgage fraud can leave victims with inflated property values, higher property taxes, an inability to sell their homes, or damaged credit histories.

Following the location of strong housing markets across the country, mortgage fraud occurs nationally but is more concentrated in the large urban areas in Quebec, Ontario, Alberta and British Columbia (B.C.).

Numerous criminal groups across Canada are involved in a wide variety of mortgage frauds for profit or to further other criminal activities. Some undertake a limited number of relatively simple mortgage-related frauds while others commit multiple mortgage frauds involving anywhere from several dozen to over one hundred properties.

Mortgage fraud schemes undertaken by organized crime groups will become increasingly sophisticated through the use of technology, for example, involving online sources of fraudulent documents, such as black-market websites, to obtain stolen or counterfeit financial information. 

Financial institutions’ heavy reliance on computer-automated underwriting and property-valuation systems to conduct mortgage transactions, coupled with the difficulty of verifying the borrower’s income or identity, will continue to be a major vulnerability contributing to mortgage fraud.

Criminal groups across the country will remain involved in mortgage frauds for profit, as there are always ways to illicitly manipulate the age, size and value of a property. Organized crime will continue to exploit professionals within the financial and real-estate industries who will knowingly or unknowingly assist them in their fraudulent activities.

Defining Mortgage Fraud

Mortgage fraud is commonly defined as the deliberate use of mis-statements, misrepresentations or omissions to fund, purchase or secure a loan. Simply put, mortgage fraud is any scheme designed to obtain mortgage financing under false pretences, such as using fraudulent or stolen identification or falsifying income statements. 

Risk Factors for Mortgage Fraud

Social, political and economic trends can affect the scope and magnitude of mortgage fraud. A risk factor for mortgage fraud is the strong competition between financial lending institutions during a period of economic boom and the subsequent widespread pressure for rapid mortgage approvals as individuals seek the best mortgage rates. In this competitive environment, it is often a challenge for financial institutions to ensure that all the information about the purchaser, vendor and property is accurate, a practice known as due diligence or “know your customer”. In addition, financial professionals also face pressures to approve mortgages quickly as those who deny or delay a mortgage transaction may face lost fees or sales as a consequence.   

Financial crimes like mortgage fraud are facilitated in large measure by technological advances, specifically in underwriting systems and property-valuation models as well as communication technologies. These types of crimes take advantage of processes and institutions within the legitimate economy. Criminal groups undertaking mortgage fraud exploit online transfers of funds and electronic communications that reduce the need for individuals to meet in person. In many cases, financial transactions can occur completely electronically and this can facilitate the creation of false personal and financial information.

Stolen and counterfeit identification and financial documents – such as job letters, tax forms, RRSP slips and pay stubs – are tools that underpin mortgage fraud. Methods of obtaining personal and financial information range from theft and online data mining to compromising corporate databases and using black-market websites that sell stolen data. Criminal groups use the stolen and counterfeit information to compile fraudulent identities and financial profiles and to obtain mortgages illegally.

Mortgage frauds commonly involve the cooperation of mortgage industry insiders. Any individual within the mortgage industry can potentially be involved in mortgage fraud; from the purchaser, vendor, real estate agent, and mortgage broker to the lawyer, credit agency employee, lender and title insurer. These insiders may, for example, knowingly or unknowingly accept the use of false personal or financial information, use inaccurate appraisals, or transfer mortgage funds to an individual knowing they will be misused.

In the United States, the Federal Bureau of Investigation estimates that 80% of mortgage fraud losses involve industry insiders1.  While no similar reliable statistics are published in Canada, corrupt insiders will continue to be an ongoing risk and concern to law enforcement.

1 Mortgage Fraud Report 2006. Federal Bureau of Investigation (FBI). May 2007

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