Mortgage brokers are advocating for tighter industry rules in the wake of allegations that dozens of brokers working with Home Capital Group Inc. falsified client income information.
Home Capital announced late last month that it had suspended 45 brokers for allegedly committing fraud on mortgage applications, leaving the industry in damage control mode.
Walid Hammami, a Montreal-based broker with Dominion Lending Centres, says the incident illustrates a larger systemic problem with mortgage fraud. There are likely more transgressors than the 45 identified by Home Capital, he says.
"These guys not only give us bad press, but they are also unfair competition," Hammami said, noting that brokers who play dirty by falsifying income data are stealing business from those who follow the rules.
Rather than taking the appropriate steps to qualify for a mortgage, a process that could take some time, a client could simply find a broker willing to forge the documents and get approved immediately, Hammami said.
"It's like people using steroids in sports," Hammami said.
Experts say that as lending rules have tightened and competition from the country's major banks has increased, brokers are fighting for a slice of a shrinking pie.
"Not only has the industry become more competitive, the underwriting rules have tightened," said Tony Piattelli, a Calgary-based broker with Quantus Mortgage Solutions. "So they're getting squeezed on both sides of that equation."
That can spell trouble for those relying on commissions from mortgage deals to cover living expenses and support their families, experts say.
"When you make it tougher to make a living, those that are so inclined will start to work around the rules," said Blair Anderson of brokerage Anderson Associates.
Tougher educational requirements might help. Currently, an individual wishing to become a mortgage agent has to score at least 60 per cent on a mandatory course.
"I think maybe they could weed out a few bad apples by raising that standard a little – even just to 65," Anderson said.
Some brokers have suggested more ethics training. However, Hammami says it's easy to "talk a big game" about ethics.
"Applying it is a different story," he said – especially for those facing a dire financial situation.
Some brokers, including Hammami and Piattelli, say regulators or employers should ensure that those just starting out in the industry have a backup plan – such as a substantial amount of savings or access to a line of credit – to help sustain them in case commissions fall short.
That could help prevent them from making poor decisions due to financial stress.
"You have to have a bit of a war chest," Piattelli said.