Oh high lending standards, oh high lending standards, wherefore art thou high lending standards?
An undercover team from CBC Marketplace went out and visited 10 homes listed by agents and brokers. Out of those 10, 6 of them offered to commit fraud to sell them the house. Not 1 or 2 but 6.
The pair visited 10 properties for sale by real estate agents or brokerages where previous research indicated fraud may be taking place.
The agents busted offered to facilitate mortgage fraud by setting up buyers with counterfeit documents and brokers who would apply on their behalf. According to Carl Davies, head of fraud and identity at Equifax Canada, 15k and 24k mortgage applications are flagged each month for suspicious activity. 60% of those end up being cases of fraud.
This is the problem when the market for real estate and mortgages dries up and the party is over. I would not be surprised if, in the US, we see an acceleration of such cases. Hold and behold the American Banker Association is warning of the same issues and seeing a sharp rise in risky applications and fraud.
When you are trying to keep the lights on, the temptations for cutting corners and fraud rise. The same thing happened in late 05 and 06 when all the good qualified buyers started drying up. We had the same thing happen in 2020 and 2021 when top earners went out in a historical disproportional number to buy homes and second homes to ride out the pandemic. The picking is slim, rates are up, and the creativity is rising in mortgage products as prices fall.
I have warned before and will continue to warn that current regulations on non-bank lenders are nearly non-existent and we are setting ourselves up for a crisis.