Mortgage Broker Regulators' Council of Canada

Brokers' Responsibilities to Prevent Mortgage Fraud

Mortgage brokers have a critical and proactive role to play in detecting and preventing fraud. Below is a summary and reminder of a broker’s obligations.
Proactive fraud identification
Mortgage brokers are prohibited from giving or assisting in giving false and/or deceptive information and/or facilitating dishonesty, fraud, crime or illegal conduct.

Mortgage brokers have a duty to act proactively to prevent and detect fraud, which includes the legal obligation to take reasonable steps to verify the identity of each borrower or lender/investor.

Mortgage brokers also have a duty to ensure that public relations materials do not contain false, misleading or deceptive information, as this may be perceived as a fraudulent practice.
Verification of income/employment documentation
There has been an increase in media coverage about the falsification of income/employment documents supporting mortgage applications. In addition, marketplace information appears to indicate a prevalence of misstated employment income information in mortgage applications. The current situation highlights the importance of ensuring that due diligence is undertaken to mitigate the risk of false employment income information.

Mortgage brokers have a duty to inform lenders promptly if they have reason to doubt the accuracy of information in a borrower’s application, including income/ employment documentation. These duties continue even after the borrower enters into a mortgage agreement.

Brokerages are also expected and in some jurisdictions they are required to establish and implement written policies and procedures relating to fraud prevention and compliance. These policies and procedures should clearly outline the diligence required of all registrants when it comes to ensuring the accuracy and validity of documentation and information received from borrowers or lenders and that mortgage fraud is prevented.

The broker is expected to take steps to verify employment/income information, and document the steps taken in situations where it knows or ought to know that income information likely is incorrect, including but not limited to situations where the borrower’s income information is not consistent with the person’s Notice of Assessment from the Canada Revenue Agency.

The steps to verify a borrower’s employment and income information may include, but are not limited to:
  • Asking the borrower for additional documents such as a business card or employer-issued building access card to demonstrate employment with the stated employer.
  • Verifying that the borrower’s stated employer or place of employment exists.
  • Calling the borrower’s stated employer to verify the content provided in the employment letter and pay stub.
Failure to comply with these fraud prevention best practices may expose you to enforcement action, including licence suspension or revocation and administrative monetary penalties. If you are unsure of your responsibilities or have any questions, please contact your provincial regulator.

It is also expected that principal brokers have a system in place that is reasonably designed to monitor compliance by all registrants. Principal brokers are also required to ensure that brokers and agents are adequately supervised to support fraud prevention and detection measures.