CMHC on lookout for fraud
Housing agency directed by Ottawa to be vigilant on mortgage irregularities
OTTAWA — Canada Mortgage and Housing Corp. is beefing up its ability to detect patterns that may indicate mortgage fraud after being directed to do so by the federal government, says the agency’s president and CEO.
“There is no evidence that fraud is a widespread problem,” Evan Siddall said Thursday following his remarks to the Canadian Club of Toronto.
“But we know it happens, it’s very hard to find, and incentives exist for fraud in the system, so we need to be vigilant.”
Mortgage fraud has been a hot topic following recent events at alternative lender Home Capital, which has been dealing with the aftermath of a scandal involving falsified loan applications.
In 2015, Home Capital severed ties with 45 brokers over fraud allegations.
Two of those brokers have been sanctioned by the Financial Services Commission of Ontario; the other 43 have not.
On Thursday, the commission said it concluded its review into all 45 individuals and has not taken any action against 43 of them.
Last week, it said it had disciplined a mortgage broker and an agent after finding them to be non-compliant with the province’s Brokerages, Lenders and Administrators Act.
Home Capital faced a liquidity crisis after customers started yanking out their savings following Ontario Securities Commission allegations that the company misled investors in its disclosures surrounding the fraud issue. The company has said the allegations are without merit and has vowed to defend itself.
Siddall said the housing corpo-
ration’s stepped up efforts around fraud detection were not triggered by Home Capital, but by a directive formally issued to the agency by Ottawa.
The housing agency is looking at ways to use data analytics to spot patterns that could be indicative of fraud networks or fraud rings. That would allow it to approach lenders when it spots something suspicious.
“We’re looking for associations among individuals that aren’t apparent from an individual application for mortgage insurance, but are apparent when you look at a large number of applications, and then you can identify networks and patterns,” said Steven Mennill, the corporation’s senior vice-president of insurance.
The corporation has not seen any increase in mortgage loan defaults as a result of the Home Capital matter, Mennill said.
Home Capital also remains a CMHC-approved issuer of mortgage-backed securities, through its subsidiary Home Trust Company, Siddall said.
“We’re monitoring the situation daily, as we do with many lenders,” Siddall said.
In his speech to the Canadian Club, Siddall said the national housing strategy his agency is crafting will be far more ambitious than just building homes, and is looking to close the equality gap between the haves and have-nots.
He said the forthcoming plan would increase housing supply — up to 80,000 new affordable rental units, for instance — grow the economy and potentially double overall spending with help from the private sector.
Siddall said the corporation aims to use $5 billion earmarked in the 2017 federal budget to stimulate more than $16 billion of investments over 11 years in affordable housing, including increases in CMHC direct lending of $8 billion and $2.9 billion of matching co-investments from housing providers, governments and the private sector.
The extra $10.9 billion, if it were to come to fruition, would be above the $11.2 billion package the Liberals unveiled in their second budget. “Inequality threatens the very fabric of western society,” Siddall said.
“I’ll be so bold as to suggest that this strategy is being created precisely to diminish the inequity that we see growing in our communities daily — to close the gap between ‘haves’ and ‘have-nots’.”
The comments are a change of tone from Siddall, who months ago tried to temper high expectations that the strategy would meet hopes that a national plan would deal with concerns about affordability in the country’s biggest cities.