The regulator says brokers and agents have a responsibility to act as strongly as possible against fraudulent practices
Cases involving fabricated identity documents and door-to-door scams are some of the most prominent types of suspected mortgage wrongdoing being investigated by Ontario’s financial services regulator in 2023, according to the organization’s director for forensic analysis and investigations.
Chris Zolis, of the Financial Services Regulatory Authority of Ontario (FSRA), told Canadian Mortgage Professional that while there hadn’t necessarily been a significant recent uptick in those case types, they had proven “somewhat pervasive” in the year to date.
Where illegitimate documents are concerned, Zolis emphasized the importance of mortgage brokers and agents doing their due diligence and carrying out all requisite checks in order to avoid regulatory scrutiny.
“Look out for anyone willing to do shortcuts, authenticate identities, know who you’re dealing with,” he advised. “Don’t be afraid to ask the questions with respect to how genuine the document is. Know who your client is – everyone has a role to play.”
There’s a particular onus on mortgage professionals to prove that they took every step possible to guard against improper or fraudulent behaviour in the application process, Zolis added.
That’s despite the frequent temptation to take due diligence for granted and make assumptions about the trustworthiness of an actor or mortgage applicant.
“Don’t bypass any obligations. There are regulations that lay out what mortgage brokerages ought to have known, and it’s against the regulation to facilitate dishonesty, fraud, or illegal contact,” he said. “There are no ‘willingly, intentionally, knowingly’ included in our act. It’s not like the criminal code. It’s ‘ought to have known.’”
If you’re buying a new home in Ontario, beware of mortgage fraud!
— Ontario Housing (@housingON) July 21, 2023
Be suspicious if you’re asked:
🔍to say that you make more money than you really do
🔍to lie about whether you will live in a property or rent it out
🔍to sign documents that have blankshttps://t.co/i8Tp0A2VAm pic.twitter.com/bqzhNiV5n0
Difficulties remain in investigating cases of door-to-door malpractice
The beginning of 2023 saw reports of a spate of cases of door-to-door sales scams across the province resulting in vulnerable individuals being saddled with liens or mortgages being placed on their property.
Such cases highlight the possibility of numerous actors involved across different jurisdictions – whether geographical or in a regulatory sense, Zolis said.
The presence of outright fraud in those cases can be difficult to prove, he said, particularly as demonstrating that a borrower was misled in what they were signing is far from straightforward.
“There’s an expectation that people read what they’re signing for. These cases are complex – again, they involve a number of actors,” he said. “To try and achieve a state where the individual knew or didn’t know what they were signing is hard to pin down.”
While there are disclosure obligations within the securities industry, not everyone necessarily reads everything that’s presented to them, Zolis added. “Nonetheless, there are signatures that take place so it’s hard to say whether or not fully informing [borrowers] is a non-disclosure, given that signatures may have taken place.
“Quite often, it’s too late. The individuals have signed contracts not knowing what they were signing up for. It’s questionable whether there was full disclosure. So I sympathize with any vulnerable population, whether it be seniors or other people who don’t read the fine print.”
How mortgage agents and brokers can help protect against fraud and impropriety
FSRA licensees and others have an obligation to help protect vulnerable individuals, Zolis said, highlighting the value of a strong awareness and understanding of those case types and full collaboration with regulatory bodies.
“A big part of this is education for the consumer, education for brokers and agents,” he said. “Everyone has a role to play and similarly, FSRA has a role to play in educating the public and raising awareness. We do have our enforcement actions and warnings that are posted on our website that the public can go to.
“We have a whistleblower program that protects identities. We’re always looking for valuable information where an insider may typically have access to the information that’s willing to come forward.
“And we have a complaints portal where individuals may lodge a complaint against someone they’re dealing with within our sector. So information is valuable. We want to ensure that there’s a channel for reporting misconduct or contraventions. We want to ensure that the level playing field is level for all agents and brokers and no-one should be taken advantage of in the public.”
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