- Walk into a store, fill your pockets with merchandise, then walk out without paying?
- Gas up your car at a service station, then peel rubber without paying?
- Endorse a cheque payable to someone else then cash it?
- When filling out a mortgage application falsify information in order to obtain financing?
The answer most honest people would give to #1. through #3: ‘absolutely not, it’s dishonest and illegal’.
Yet when it comes to #4 it’s amazing how many otherwise honest folk would deliberately be very economical with the truth in order to secure that ‘must-have’ mortgage funding for that ‘must-have’ property.
Many people feel that this latter is perfectly OK. Even if the amounts stated are totally out of kilter, there is that dogged determination that prevails: ‘I can afford it’ even though that may not be true.
What if the NOAs (CRA Notices of Assessment), T4s, T1s and pay stubs don’t seem to measure up to the applicants’ claims? No problem, just get someone to fabricate some new ones! There is a veritable underground/cottage/basement industry out there that will happily manufacture (forge) all of the above paperwork to enable some poor devil to dig him/herself a deeper financial hole!
Yet do these same people who would never commit crimes #1-#3 see nothing wrong with falsifying income claims etc. in pursuit of mortgage financing? Apparently not. hence the precarious position in which a large corporation, Home Capital, now finds itself.
The story, although having taken place in 2016, has just emerged in the past month about Home Trust (the mortgage arm of Home Capital) being a victim of the crime of mortgage fraud.
Home Trust, one of the best-known ‘alternate’ lenders in the mortgage financing business, discovered that some 45 mortgage brokers, when filling out applications, had been falsifying such critical information as earnings, employment longevity, and even critical CRA outstanding tax statements. Once the fraud was discovered, the 45 brokers were summarily dismissed. But the damage was already done. Once the news of the fraud leaked out that many mortgages may have been the product of falsified information and fraudulent activity, the dominoes started to topple.
Since the lifeblood of any mortgage lender such as Home Trust is the deposits made by investors to generate mortgage funding, a crisis was in the making. Within a very short time after this information became public, millions of dollars were pulled out by nervous investors, causing a drop of some 60% in the value of the company stock, a very serious situation. So serious, in fact, that HomeTrust Capital was forced to negotiate a $2 billion Line of Credit in order to keep the funding pipeline open, and to date, approximately $1.7 billion has already been drawn on. So, some serious problems may lie ahead for this venerable lending institution; is a takeover by another institution, or total oblivion in their future? Only time will tell.
And where did it start? #4, a bunch of greedy, dishonest, self-serving brokers bending the rules to make a buck! And, sad to say, they are not the only guilty parties, in my opinion, with soiled hands. I have talked to a number of would-be home-buyers, so anxious to get into the market and grab their ‘piece of the rock’ that they see nothing wrong in falsifying relevant documents, if necessary, to clinch the deal as they feel this to be a ‘victimless crime’. Tell that to Home Capital!
I guess sometimes zeal trumps common sense and honesty!