Fraud 1: Thinking About Mortgage Fraud in Canada: Why Non-Bank Lenders Must Stay Vigilant

There’s a rhythm to underwriting, a cadence you find after years of reviewing applications, scanning credit reports, and picking up on the subtle cues that tell you when something doesn’t quite add up. I still remember one of my earliest mentors telling me: “If it feels wrong, it probably is.” It’s advice I’ve carried with me across roles, companies, and lending contexts.

Now that I spend more time working in private and alternative lending, that same intuition, paired with experience, feels more critical than ever. Because while we’re focused on helping borrowers access financing outside traditional channels, our space is also one where mortgage fraud tends to hide in plain sight.

Fraud Isn’t Just a Bank Problem

Mortgage fraud isn’t new, and it’s not exclusive to big financial institutions. In fact, non-bank lenders (Mortgage Investment Corporations (MICs), private lenders, credit unions) can be particularly vulnerable. Why? Because flexibility, which is often our greatest advantage, is also what makes us a target.

Private lenders tend to accommodate self-employed borrowers, non-traditional income, and unconventional property types. We move faster. We make exceptions. But that same flexibility can open the door to fraudulent files those cleverly fabricated income documents, down payments that don’t quite make sense, or refinances built on shaky title foundations.

I’ve been watching with interest (and concern) as title fraud and identity theft make headlines again, especially in Ontario. We’re seeing cases where homes are mortgaged or even sold without the rightful owners’ knowledge. It’s a chilling reminder that due diligence can’t be optional, especially when handling large equity take-outs or dealing with borrowers you’ll never meet in person.

Lenders must actively monitor for red flags. And for underwriters, that means verifying, not just accepting, every document, every explanation, every assumption. It’s not about being suspicious; it’s about being disciplined.

Why It Matters More Than Ever

Fraud undermines more than just your bottom line. It erodes investor confidence. It damages reputations. It puts borrowers into homes they can’t afford, or worse, into situations they never agreed to in the first place. And for those of us who take pride in offering responsible lending solutions, it runs counter to everything we stand for.

But here’s the thing: when underwriters are equipped with the right tools, supported by leadership, and encouraged to dig deeper when things don’t feel right, fraud becomes a lot easier to stop. One file at a time.

What’s Next in This Series

Over the coming weeks, I’ll be sharing insights on mortgage fraud tailored specifically for Canadian non-bank lenders, something Open AI’s Chatgpt4 has helped research and write. We’ll cover:

• Fraud-for-shelter vs. fraud-for-profit schemes

• Real-world fraud cases targeting private lenders

• Common red flags in income docs, appraisals, and credit reports

• Identity verification best practices

• And a step-by-step fraud screening checklist for underwriters

If you’re in private lending, alternative lending, or work alongside underwriters and brokers, I hope this series helps you stay sharp and maybe even spot the next suspicious file before it becomes a loss.

Let’s keep learning, and let’s keep the gate closed to fraudsters.