Equifax Reports Millennials Engaging in Mortgage Fraud
Equifax has discovered that as much as 23% of millennials are lying on their mortgage applications, believing it is justified. This group sees no issue with inflating their income to secure a mortgage.
Eye-Opening Survey
Equifax’s latest survey reveals that approximately 23% of millennials applying for mortgages think it is acceptable to inflate their annual income to qualify for a loan. The survey specifically focuses on mortgage fraud.
The survey included 1,545 Canadians from across the country. Among them, 23% of millennials believe inflating one’s income is acceptable, almost double the 12% from the general population.
Michael Porter a Fraud Investigator with Toronto-based Investigation Agency Haywood Hunt & Associates Inc. explains that inflating or manipulating income on a mortgage application is fraud. This practice can lead to individuals taking on mortgages they can’t afford, resulting in significant debt and potential future financial trouble.
A larger mortgage means higher monthly payments. Failing to make these payments can negatively impact one’s credit score and history. Equifax Canada, one of the country’s main credit bureaus, provides Canadians with free credit reports.
Legal Ramifications
19% of millennials surveyed admitted to being untruthful on their mortgage applications, with some in the 18 to 34 age group finding it acceptable to exaggerate their information. Bal warns that failure to meet mortgage payments due to such deceit can lead to severe legal consequences.
Additional Survey Insights
Interestingly, 16% of all surveyed believe mortgage fraud is a victimless crime, with 23% of millennials sharing this sentiment. Additionally, the survey found that Canadians are not regularly checking their credit scores. More than half of those surveyed do not check their credit score before applying for a mortgage, a slight improvement from 68% who did not in a 2014 Equifax survey.
AJ Mekunnel of Toronto Second Mortgage Lenders Mortgage Central Nationwide notes that mortgage lenders require a minimum credit score between 600 and 680 for approval. Lenders also scrutinize other factors such as a borrower’s income and ability to repay the loan. Mekunnel emphasizes that having a spotty credit history is not ideal when applying for a substantial loan.
The survey’s findings raise concerns for the mortgage industry. Traditional lenders already struggle to verify borrowers’ income due to regulatory constraints, and this adds another challenge. Some respondents attribute this behavior to the mortgage stress test for first-time homebuyers, which many young Canadians feel leaves them with little to no chance of buying a home.
“With the growing disparity between rising home prices and stagnant median income, it’s not surprising that many young people try to game a system they feel is rigged against them,” says Danny Papadopoulis of Homebase Mortgages, a leading lender of home equity loans in Toronto. While the dream of homeownership may seem out of reach for many, resorting to fraud to achieve that dream will only end badly. The real solution is to close the gap between income and home prices to levels seen a generation ago. Without this, mortgage fraud is likely to increase exponentially in the future.