The 3 Types Of Mortgage Fraud Costing Canadians Billions

[00:00:00] Welcome to The Canadian Real Estate Investor, where hosts Daniel Foch and Nick Hill navigate the market and provide the tools and insights to build your real estate portfolio. Imagine this, a part-time casino worker in Toronto secures a $1.4 million mortgage by claiming an overseas tech job that pays her $300,000 a year.

[00:00:24] In reality, she earns a fraction of that working at a casino and even receives government child benefits. Or picture a hairdresser in Ontario who somehow owns three homes backed by documents stating she makes over $536,000 annually as a business manager from a company in Guangzhou, China. These aren't plot lines from a crime drama. They're real examples of alarming trend unfolding in Canada's housing market.

[00:00:52] Mortgage fraud. It's everywhere. And business is booming. And honestly, Dan, those do sound like some pretty great little true crime documentaries, but they are just many of some of the many stories that we are going to go through and that'll illustrate how crazy things have gotten here. Lenders are on the edge as they are facing rising losses, inflated home prices, and an onslaught of bogus applications.

[00:01:17] Organized criminals are exploring the cracks in our system, overwhelming regulators and law enforcement, and ordinary people squeezed by high sky-high housing prices are feeling tempted or even forced in some situations to bend the rules just in order to secure a roof over their heads. Today on the Canadian real estate investor podcast, we are peeling back the curtain on the rise of mortgage fraud in Canada.

[00:01:44] I'm Dan Foch, a realtor joined by my co-host Nick, a mortgage broker. Neither of us participate in mortgage fraud, so we had to do a lot of research for this one. Over the next hour, we'll investigate how and why mortgage fraud has surged to unprecedented levels in Canada and what that means for you, the real estate investors, and for the housing market, and for the country at large.

[00:02:05] This is inspired by a recent article or a research document called Fighting Mortgage Fraud in Canada by Cameron Field for the McDonnell Laurier Institute, which is like a nonpartisan think tank. And the document's objective is to combat mortgage fraud and financial crime, saying we must foster greater collaboration between reporting entities, law enforcement, and other stakeholders.

[00:02:29] We're going to break down different schemes from the desperate homebuyer fudging income numbers, what's commonly called fraud for shelter, to more complex rings of brokers and even fake buyers known as fraud for profit, all the way to international money laundering operations using real estate as their personal laundromat. We'll share some real-world case studies, some of which really read like crime novels here.

[00:02:56] We'll analyze how weak enforcement and policy gaps have been to let this problem grow even faster. And more importantly, since this is getting more and more attention at a political level, we're going to explore the solutions that are on the table. You know, friend of the show, Ron Butler, has testified in front of the government about this, and they're talking about ways that they can solve this problem. Should Canada create a new financial crime agency like it's being proposed?

[00:03:25] How can banks and regulators step up their game? And did you know accountants already have the tools to verify income with the Canada Revenue Agency? I know a lot of people are saying, oh, it should be as easy as connecting the CRA with the banks. Well, there's already ways to do that. These tools that, you know, if opened up to lenders could probably shut down a huge chunk of this fraud overnight. So we're going to get into that and more. So the first thing I want to start with is this perfect storm in the housing market. Mortgage fraud isn't new, but Canada has been seeing an explosion of it in recent years.

[00:03:55] It seems to walk hand in hand with periods of mania. Actually, at the beginning of the big short, Michael Burry's character, he is quoted saying, did you know that one of the hallmarks of mania is a rapid rise in the amount and sophistication level of mortgage fraud? And it's going up. And that was kind of this big, his moment that really tipped him off to that trade. So like to set the stage here, let's look at the numbers a little bit.

[00:04:21] In 2024, the Canadian Anti-Fraud Centre received reports of over $638 million in fraud across all sectors, bringing losses since 2021 to above $2 billion. And that's likely just the tip of the iceberg. Officials estimate these reported figures may represent as little as 5% to 10% of the true fraud happening. Yeah. So do the math. If you're looking at a potential $100 billion, I guess, in a fraud problem over just a few short years,

[00:04:51] mortgage scams are big and they're lucrative and they're a growing slice of that fraud pie. So why the spike in mortgage fraud? Well, it comes down to that perfect storm that you're mentioning, Dan, and that includes both social and economic factors. The first is housing affordability. If you're a long-time listener to the show, housing affordability has come up once or twice, Dan, or the lack thereof affordability-wise. Almost half of Canadians are deeply worried about housing costs.

[00:05:19] Home prices have soared out of reach for many families, especially in the hot, busy markets like Toronto, Vancouver, and now Calgary, and even Montreal. And when we look at that problem, we layer it with other issues like rising interest rates or just interest rate volatility. The Bank of Canada's interest rates since 2022 meant that borrowers would have to prove they can handle these higher payments. And suddenly, a lot of ordinary people that were either in or trying to get into the housing market

[00:05:49] couldn't afford to qualify for the homes they wanted to purchase. Exactly. And so you really can see the human cost of it. Tougher mortgage stress tests and high rates were meant to safeguard the system to ensure people don't take on loans they can't afford. But there was unintended consequences. Consequence number one, the easiest one for people to see, was that when the stress test happened, it took a lot of people who would have been going into the fixed mortgages, and they just moved to the variable mortgages.

[00:06:16] Remember when everybody was going into variable rates because they were low at that period of time, and then it actually did the opposite because it put the people into more high-risk mortgages. So there's that, but then it also, there's a period of time where really people were pushed to cheat, right? When the rules got stricter, those margins, you know, the margins were getting tighter, and those people who were in those margins felt more pressure to find a workaround, right? Get creative in their financing.

[00:06:46] That's not what we mean when we say creative financing, by the way. And if your dream of home ownership was slipping away because you officially earned just a little bit too little, or you, you know, you've got too many expenses, or the type of income, or your credit's too, you know, too new, or whatever it is, you might be tempted to inflate or embellish some of these things on a mortgage application. That's what's called fraud for shelter, right? This is the most common type of mortgage fraud.

[00:07:14] Basically, everyday folks misrepresenting their finances to get a place to live. And look, it's not always malicious, okay? In the sense of like feeding the organized criminal rings that we're talking about. Often it's just driven by desperation in an unaffordable market. Think about it. When renting is expensive and buying seems impossible, some people will do whatever it takes to just get their foot in the market, right?

[00:07:42] Get on that first rung of the property ladder. We saw this especially during and after the pandemic, right? COVID-19 not only disrupted incomes, but it also slowed housing construction, which worsened that existing supply crunch already. Fewer homes, more buyers, and rocketing prices, you know, that put immense pressure on buyers in the market in general. And these tough times that shelter fraud tends to spike. And we saw that live.

[00:08:12] And I remember doing episodes on it when it was happening and still is. Yeah. Well, there's that like the CBC expose that was kind of like the smoking gun around fraud for shelter when, you know, the government was sort of forced to pay attention to it because CBC did something on it. Yeah. But, you know, there's these arguments that I've seen. Like I've been a part of this conversation for a long time. And there's these arguments that some people actually say that the borrowers who are committing fraud are actually more likely to pay their mortgage because there's this difference between,

[00:08:42] I don't agree with this, by the way, but this is, you know, the, this is like. Okay. Yeah. I have a theory here, but tell me where this is going. Well, because, so, so there's this thing called soft fraud versus hard fraud. So basically if you, if there's a financial loss, then it's hard fraud. So you can like go to jail for it. And if there isn't, then it's soft fraud and it's not really punishable, right? Like the way that the bank could kind of find out about it and then strip the mortgage away from you or whatever.

[00:09:08] If that, and so, you know, when somebody does this fraud for shelter, they've committed soft fraud. If they fail to pay the mortgage and it results in a loss in the bank, now it's hard fraud and it's a criminal. And so, so that this is, this is the argument that I've heard. I don't know whether or not this is true, but it's just an interesting thought experiment. Part number two that I think is interesting. And I'm going to kind of get to a little bit of an example and to put a face on it is I think this has been happening forever.

[00:09:31] I grew up in like, you know, kind of a rural, I guess it's, it's, it's developed now, but it's like, it was more of a rural, like, or like small suburban area. A lot of skilled trades, right? A lot of blue collar folks and skilled trades have been doing this for a long time where, you know, that your boss would write you, your job letter, your paychecks. And they'd, they'd give you a boost in your pay stub, the two pay stubs that you needed to qualify for the mortgage or whatever.

[00:09:53] Like, so it's not, cause I think that that CBC expose was really focused on one cultural minority and it's been, been blamed on, on that group recently. And it was blamed on a different group in, you know, 2016, 2017. Uh, the reality is I think that this is very widespread and it's not really focused on one, one group within the country. And now to put a face on this a little bit, consider a hypothetical, but typical scenario, young couple in Vancouver, tired of paying sky high rent, you tail as old as time, right?

[00:10:23] They finally save up a down payment, but because of the stricter rent lending rules, the bank says, no, you don't earn enough money on paper to qualify for a mortgage. So what do they do? They tweak the paper and maybe they add a little bit to their salary letter. Like I was mentioning with the, you know, a lot of the blue collar folks where they're bought, they had a good enough relationship with their boss. They just ask them to do it. Uh, maybe they find a friend who owns a company who agrees to say that one of them works there. And suddenly with some false documents, they get a loan.

[00:10:52] This is fraud for shelter. Again, the most widespread form of mortgage fraud in Canada. It's illegal. Yes. But in their mind, it is a victimless lie for a good cause, a home. The victim, I guess would be the bank really, if, if they stopped paying and most people, then nobody's weeping for Canadian banks really. You're right. But however, and this is the key part here, even fraud for shelter, when it starts small and seems harmless, it kind of undermines the whole system, right?

[00:11:21] If people miss state income or debts to get mortgages, banks end up lending to folks who may struggle to pay the money back. It introduces risk into the housing market and in aggregate can inflate prices because more people qualify for bigger loans. Because then they should be. Plus with some that get away with it, others often hear about it and think, well, maybe I should just be doing that too. Hey, like this guy did it and he got away with it. And, you know, all he had to do was ask a favor. And, you know, it never feels like a crime.

[00:11:51] If you're just writing something down on a, on a piece of paper, calling in a favor. And no wonder because nearly 47% of Canadians believe mortgage fraud is common. It's crazy. And that's from rates.ca. So, I mean, this is like half of the country being like, yeah, it probably happens. In one survey, about one in six even said they think it's acceptable to fudge income or job details on a mortgage application.

[00:12:14] And that's a sign of just how normalized this has become under, you know, under this like housing crisis and frenzy that we've been in for years. And I just want to circle back because I thought you were going to go, you know, it's, it's only really, it's soft fraud. So like people don't feel too bad about it. And it's almost that human nature thing where if like I just pay and like fly under the radar and don't draw attention to myself, you know, then I'm going to be okay.

[00:12:39] But I love that if you, if you miss something, then it kind of really becomes, you know, that second piece becomes the illegal part. Right. Yeah, it is. I mean, it's another broken piece of the system. Right. Like, I think it's another kind of element. That's just the, the, the system kind of got to this point from it being broken. And then this kind of just adds another like layer of how messed up Canada's housing market is. Yeah. It's a matter to us as investors, because these are who we're competing with.

[00:13:06] I mean, a lot of investors, I think are doing this as well to tell you the truth. Um, and, and, you know, just as many on, in the housing, but this is what creates a more competitive market. If everybody's cheating, like, you know, it's like, it's like steroids, right? Like all, I don't know if anyone watched the liver King documentary on, uh, Netflix, you know, it's like, you know, if everyone's doing that, then the playing field is different than it was. Right. Yeah. Or, or just think monopoly.

[00:13:30] If everyone, if you're, if everyone's kind of stealing from the bank and the game of monopoly, you know, or, or, you know, like you just, you lose the fundamentals. You, you shift away from, you know, here, here's the threshold. Here's the starting platform. Well, these, these people are already up here and you know, how do I get up there? And then, and then the bar gets raised and what's real has become almost obsolete at this point. And everyone has to lie just to keep up. Yeah.

[00:14:23] Yeah. And crime schemes, right? Like these are big entities. I mean, um, I've seen it on the, on the tenant side where, you know, we'll call someone and there's like a, people can get go, uh, as a tenant can get like a fake employer and fit and they'll answer the call. They'll get, you can get fake references and all this stuff. It's deep. Yeah. I mean, it is like, that's a big entity. And while people, many people commit fraud for shelter, there's a whole other breed of bad actors committing fraud for a different reason. And that's fraud for greed.

[00:14:52] So let's dive into that next in, in kind of understanding the, the fraud spectrum, shelter, profit, and then money laundering. Yeah, for sure. I mean, look, not all fraud is created equal. Okay. Experts generally break it down into kind of the three categories that you just mentioned. And it's worth understanding each one of them because they range from the, you know, quote unquote, harmless, victimless white lie that we're talking about here. Not financial advice, by the way. Not financial advice.

[00:15:19] All the way up to that serious organized crime that that's doing this in the tens of millions, uh, uh, scale. Right. So we've talked about fraud for shelter. That's the relatively common one. The small scale misrepresentation by borrowers who just want a home. Okay. It's widespread, but it's usually not linked to criminal organizations. Now, the next one is the next level is fraud for profit. Dan, tell me about what this one is.

[00:15:46] Fraud for profit often involves industry insiders, say a rogue mortgage broker or real estate agent. Yeah. I know who manipulate the system to make illicit money. This could mean forging documents, bribing appraisers, or using straw buyers, people who agree to purchase a property in the name on behalf of the fraudster. The goal here isn't simply getting a house to live in. It's to extract cash.

[00:16:12] Many, you know, many think that maybe they inflate the property's value to get a bigger mortgage. Then the house is worth pocketing the extra cash and then disappearing, leaving the lenders with this, you know, this levered up asset that's no owner in sight. Or they might secure multiple mortgages on the same property from different lenders, a classic scam, and then take off with the funds. I've heard of people like trying to line up closings like all on the same day. So like they all get registered. I don't know if that's actually a thing.

[00:16:41] It sounds pretty like it won't work. But this type is less frequent than fraud for shelter, I would say. Fraud for shelter is probably like it's lower impact, but way more common. But these things are bigger. So they pose a big systemic risk to the industry, especially when insiders like brokers or bank employees are involved and exploit their positions of power to kind of like make this a lot easier for people committing fraud. Yeah, for sure. Okay, so let's attach a little example to that, Dan.

[00:17:09] I don't know if you remember, there was a case in Ontario a few years back where a network of scammers, and I think we talked about this when it was kind of breaking news on the podcast. But so this network included a mortgage broker who arranged loans on properties using fake identities and documents. They would then buy cheap homes, fraudulently inflate the value, get big mortgages, and then vanish, leaving the banks holding the bag when the loans ended up defaulting. Now that's fraud for profit in a nutshell.

[00:17:38] It's basically a heist using paperwork instead of a crowbar. Yeah, instead of a burr, it's just a buy. Oh, we're not going to introduce that as the next real estate investment thesis here. Finally, the third category that we haven't discussed yet, and arguably the most damaging in the grand scheme, is fraud for money laundering. So this is when criminals use mortgages and real estate transactions to wash dirty money and integrate it into a legitimate economy.

[00:18:08] You've all seen the show Ozarks? Yes, great show. The, what was it? The Blue Cat Motel? I think so, yeah. The Blue Cat Motel was a mortgage money laundering scheme, right? You buy a property, you pump a bunch of cash into it, you eventually sell property or get legitimate cash from the operations of the business. You know? I'm more of a riverboat casino guy myself, but- Similar thing. That was a good one. It often overlaps with the two other types.

[00:18:35] For instance, a criminal might lie about income, fraud for shelter style to get a mortgage, and then, you know, they might be working with complicit insiders, fraud for profit style to pull it off. But the difference is why they're doing it. The aim here is to take money earned from crimes, say drug trafficking, corruption, fraud, and make it seem legitimate for things like house payments or sale proceeds or rent. So you're probably wondering, okay, I think I get it, but how does it work? Well, let's go through the mechanics, okay?

[00:19:05] An individual, it could be a criminal themselves or a straw buyer that they control, that they purchase a property often with a large cash down payment comprised of illicit funds. This is why banks want to know where that money's come from so they can follow back and make sure that it's not illicit. They might even take on a mortgage from an unsuspecting lender to top it up. Now, over time, they funnel more dirty money to quietly pay off that mortgage and cover the carrying costs of that property.

[00:19:34] So from the bank's perspective, it looks like a normal loan is being repaid and everyone's happy. Meanwhile, the criminal's money is slowly being converted into equity, into real estate in a nice, clean fashion. Then comes the final step. They sell the property. Now, upon that sale, the mortgage is paid off and any leftover funds, including the appreciation that that property has ideally experienced over that a lot amount of time, come back as seemingly legitimate profits.

[00:20:03] And voila, it's gotten cash and the cash has been sanitized and it can be reused openly back into the system often to fund more crime. And there you go. The negative feedback loop continues. It's a circle of life, man. Not my life. This kind of mortgage fraud for money laundering distorts property values and undermines trust in the financial system. Right. I mean, the property value side, it can drive up prices. Think of criminals snapping up luxury homes or, you know, like the Blue Cat Motel with easy money.

[00:20:33] They go and buy it cash. They don't really care about the valuation because that's not really, their model doesn't depend on it. They have a completely different incentive. And so they're not really rational. They don't care that much about the price. I mean, there's people who even just do loss harvesting for business purposes, which is kind of technically not even really illegal. It's not like a fraud, but you know, they want, they buy things for the losses. If they're buying it for the losses, they're, they're not, they don't really care if they're.

[00:21:01] That's not usually advice we give, is it? I can't remember. No, but this price is honest buyers out of the market and it has what experts call national security implications. And this is what I, I honestly think you're hearing a lot of the issues in the U S right with, with Trump taking issue with Canada and talking about national security threats, because a lot of this large scale laundering often connects organized crime networks from around the world or even terrorist financing.

[00:21:27] And this is what the, the document or the, the, um, entity FinTrack is. And the, the act is, um, proceeds of crime and anti-money laundering act or in terrorist financing act, sorry. And in Canada, we've seen hints of this in the so-called Vancouver model. It was called, um, of money laundering where overseas drug money was funneled through casinos and into real estate. Uh, now similar concerns are popping up in Toronto's housing market and in America. All around the world were all around the country. Sorry. Yeah.

[00:21:54] Investigative reports have uncovered the quote unquote Toronto model. I guess Toronto couldn't let Vancouver and, uh, you know, the fraudulent models over there have all the fun. So the Toronto model of laundering that used fake overseas incomes to get mortgages, one whistleblower from HSBC, a bank that was quite active in Canada up until recently revealed that a scheme where people living in Canada pretended to have high paying jobs in China to qualify for big mortgages.

[00:22:22] Then a counterpart in China would deposit funds into their Canadian bank accounts to make mortgage payments. Money that of course likely came from criminal activities and some pretty bad stuff here. I mean, I don't know what good criminal activities would be, but I'm talking like, this is like international drug trading type stuff. And it was a clever ruse. The, the banks and their automated systems, these deposit looks like normal paychecks from a supposed job overseas. No big deal. No big red flags, right?

[00:22:49] Because everything matched up in the story, um, from the story to the application. Meanwhile, these criminals gradually turned dirty piles of cash into houses in Toronto suburbs. Yeah. It's particularly sobering stuff, especially because, you know, you're, you're knowing that the bank employees might've been in on it. The whistleblower. Maybe not even in, but just lazy enough that it was just like, uh, okay, whatever. You know, there was, I feel like there was never, no one pulled back that like even one

[00:23:18] or two layers to, to see what was happening. Right. Yeah. And the, and the whistleblower alleges that at least one HSBC branch in Toronto, in the Toronto area had staff colluding with the, with the fraud, even coordinating with so-called scam centers in China that provided fake documents and verified the bogus employment details. One small branch in suburban Aurora, which is just up the road from me, suddenly quadrupled its mortgage business. And I will say this was all, this all took place in 2017.

[00:23:45] So if you really want a good indication of the impacts of this, the biggest price increase in the GTA market in that 2017 big, uh, jump up and bubble took place in Aurora. No. Yeah. The biggest, the biggest drop in 2017 after the non-resident speculation tax, it was Aurora. I was going to ask if you could guess it, but you're ahead of me. I'm on fire today. There we go. And, and so this one small branch in suburban Aurora suddenly quadrupled its mortgage business,

[00:24:13] handing out loans left, right, and center to clients with tenuous ties to Canada, but extravagant incomes abroad. Like we mentioned earlier, they found a part-time casino worker who claimed $345,000 a year as a Beijing data analyst, a hairdresser claiming over 536,000 as a manager in Guangzhou. And even a homemaker with no income who somehow bought four houses. It reads like either the sequel to the big short. Literally. Yeah. Or a laundry list of impossible profiles.

[00:24:43] Yet these loans were approved. Anytime we were, we're referencing the big short this many times in the show, it always makes me a little concerned. Um, and Dan, what you're talking about here, this is a fraud for money laundering at scale. Okay. And it shows how our housing market can become a piggy bank for organized crime, drug money from overseas cartels or local gangs end up fueling bidding wars on home. It's, it's literally like, when is the Netflix documentary coming out about this?

[00:25:10] It's, it's, it's so weird to even say that kind of stuff and you, the regular home buyer or the, or the, you know, the small cap investor, we can't compete with that. It's one more factor driving up the broader housing crisis. One more layer of stuff that we really don't need. Dirty money doesn't mind overpaying. That's, that's the caveat there. And after all, it helps criminals hide their profits. So double negative here. Yeah.

[00:25:39] I think, you know, a lot of people like you want to imagine this as if we're saying it like, um, as it's like an anti Chinese government sentiment or something, but it's not like if anything, cause, cause China actually put in capital controls after that to prevent people from doing this in, in their country. So a lot of it probably was just like, they're probably just as much interested in solving this problem as the Canadian government is.

[00:26:05] And they want to know who all these buyers are and why this is happening because that, because that's money that's leaving their country and now being hidden from them. Right. And so there, I think that this is all governments are very incentivized to try and solve this problem. It's kind of weird. Why aren't they? Right. So stepping back, we have these three overlapping layers of mortgage fraud, shelter, profit, money laundering, all feeding into an unhealthy housing market. And remember, these aren't siloed. They can feed off of each other.

[00:26:35] A housing affordability crisis leads to more regular people to attempt small fraud for shelter. That creates a culture where fudging details is seen as normal, which in turn makes it easier for professional fraudsters and criminals to operate under the radar. And once organized crime gets involved, they supercharge the problem with big money and often international networks. Now, once we go international, obviously it becomes a quite a complex ecosystem.

[00:27:02] A financial crime specialist would, would agree. And, but one problem we've had is, is how to treat it in silos, right? Law enforcement might have separate teams for fraud or cyber crime or money laundering, each focusing on their piece of the puzzle. You know, going back to the Netflix documentaries, Dan, it's like, how could they not catch this person? It's like, well, they didn't have the right power team. They were working, you know, six different law enforcement agencies were working on the same thing and they wouldn't exchange information.

[00:27:29] You know, each, each, each person focusing on their own thing doesn't help because banks too often have one department looking at mortgage lending and another part, but department looking at suspicious activities and another one looking at cyber and so on. And so forth. According to Cameron Field, a former financial crimes investigator who wrote a deep dive for this on the McDonnell Laurier Institute, which we've referenced here already, this fragmented approach makes it difficult to connect the dots. Yeah. I mean, obviously he agrees that we need to start looking at mortgage fraud, financial fraud

[00:27:59] and money laundering as one interconnected problem and not three separate ones because the bad guys certainly aren't staying in one lane. Why should we? Yeah. I think that's a great point. With that in mind, let's zero in on some concrete cases to see how these frauds play out in practice and, and how the system responds or fails to like kind of where those, you know, the, the, the kind of Swiss cheese defense, right? Where are the holes? Where is it falling through the cracks?

[00:28:25] The, the stories we're about to tell you will show both the ingenuity of the fraudsters and the shortcoming of our institutions in dealing with them. So case study number one, the $500 million shadow broker fraud for profit meets policy failure. Our first case takes us to British Columbia. The year is 2018. The regulators have just made a startling discovery. Over the past decade, an unlicensed mortgage broker in BC allegedly arranged more than 500 million in home loans based on fake documents. Yes. You heard that right.

[00:28:55] Wow. 500 million, half a billion dollars in bogus mortgages. The man at the center of the scheme is Jay Kanth Chaudry. He wasn't even supposed to be mortgage, uh, brokering mortgages. His license had lapsed in 2008 and he got in trouble for submitting false documents back then. But then instead of leaving the industry, Chaudry went underground for nearly 10 years. He operated as a shadow broker working with a network of licensed real estate agents and brokers who funneled clients to him for a cut.

[00:29:21] Now Chaudry became known as the go-to guy if you couldn't qualify for a mortgage in the honest way, the good old fashioned way. Need a bigger income on your tax forms? Sure. He'd fake the CRA document for you. Job letter doesn't reflect enough salary? He'd whip a forged one up in no time. Bank statements, pay stubs, whatever papers stood between his clients and a mortgage approval, he'd manufacture it.

[00:29:49] Now, according to testimony he later gave, he systematically falsified tax and employment records to push these loans through. And it worked from 2009 to 2018. Chaudry helped arrange an estimated $511 million in loans that likely had no business being approved. Here's the thing. A lot of these loans did go through because they became actual mortgages. Some eventually went bad, exposing the fraud.

[00:30:17] But even after Chaudry's operation came to light, the fallout was surprisingly mild. The BC Financial Services Authority, the provincial regulator, did investigate it in 2019. They hit him with a cease and desist order. So please stop doing this. Classic. He was found to have- We don't appreciate this anymore. Please stop. 500 million is too much. Yeah, exactly. You've hit your limit. 11 million over your limit. It stops at 500 mil, okay?

[00:30:43] He was found to have earned about 6 million in fees and commissions from his enlisted business. Essentially, he got rich being the fraud guy. Now, you might be assuming a guy orchestrating a half billion dollars in fraud would be facing jail time. That seems reasonable, right? As of 2025, not a single criminal charge has been laid against him. It's actually crazy and kind of jaw-dropping.

[00:31:06] He even admitted under oath at a public inquiry that he faked documents and left, that he faked documents left, right? And basically, that was his entire business. Despite the confession, both provincial regulators and police seem to just shrug it off. The BC regulator did eventually name and shame him in a memo in 2023. So, he got a little bit of a public tongue lashing there. And he was banned from the industry, but that's about it. No fines, no court cases, no jail time.

[00:31:35] Yeah, I mean, really just, I guess, like kind of a black eye on the ego and the ability for us and other media to kind of talk about this because it's out in the public. But the question is, why no charges? And here's where that institutional leniency and confusion we talked about. A federal prosecutor's office wouldn't comment on the case, but behind the scenes, an investigator testified that when they brought the Chaudry file to the RCMP, the Royal Canadian Mounted Police, the Mounties declined to pursue it. The reason given, it did not fall within their mandate.

[00:32:05] So, there's confusion about who actually, whose job it is to do this. Let that sink in, a fraud scheme north of $500 million, and the federal police said it wasn't within their wheelhouse. If mortgage fraud of this magnitude isn't in their mandate, one has to wonder whose mandate it is. Yeah, wow, whose mandate is this? Look, it's a classic example of the cracks in our system, right? The regulators saw a fraud but couldn't criminally charge it. That's up to the police and the prosecutors.

[00:32:33] But the police perhaps saw it as a financial regulatory issue or lacked the resources, so they backed off. Fintrack, which, Dan, as you mentioned, is Canada's Financial Intelligence Unit, might not have even been alerted to the issue, believe it or not, because lenders aren't strongly encouraged to report mortgage fraud cases unless there are clear signs of money laundering involved. So, in other words, if this looks like fraud for shelter or profit and it's not explicitly tied to dirty money,

[00:33:01] it can slip under the reporting radar. Now, Fintrack's focus is on proceeds of crime and terrorism financing. Historically, they haven't prioritized good old plain fraud cases, and they give little guidance to the banks on flagging mortgage fraud that isn't linked to that type of laundering. So, this creates a massive gray area for people to come in and exploit. The Chaudry saga also highlights a broader issue.

[00:33:29] Canada's enforcement system for financial crime is, to put it bluntly, fragmented and often toothless. Chaudry scams were uncovered not because of a coordinated task force or a central crime agency, but through a patchwork of regulatory probes and an eventual public inquiry. Even when confronted with evidence, authorities struggled to respond decisively. And he's not an outlier. We've seen other cases, for instance, in Ontario and Quebec, where mortgage fraud rings were rolled up with minimal prosecutions.

[00:33:58] And this leniency or perhaps even inertia sends a dangerous message. If you're an unethical broker or a crime syndicate watching or listening to this, you might conclude that, hey, mortgage fraud is low risk and high reward in Canada, and that is the exact opposite of the message we are trying to convey here. After all, here's a guy who, you know, Chaudry, who faked CRA documents for years,

[00:34:23] admitted it openly at a massive scale, and then walked away relatively untouched. That's pretty much the definition of impunity. And it's not lost on criminals. Organized crime groups pay attention to where enforcement is weak, right? Go where you are treated best. And I guess that works if you're a crime criminal as well. And if they see Canada as a soft on financial crime, well, they're going to double down here, wouldn't you? Yeah. And we should note that it's not that our government is entirely asleep.

[00:34:53] They have been attempts at reform, like the talk of creating this financial crime agency of Canada dedicated to complex fraud and money laundering. The idea is to have a central body that isn't hamstrung by jurisdictional issues, one that could take charge of cases like Chaudry's. In fact, establishing such an agency was proposed recently. But as of now, it's still just on paper. It hasn't been properly funded or given a clear mandate.

[00:35:18] It's been bounced between ministries and no one's sure who's actually in charge of making it happen. So essentially, the FCA is a great idea that's stuck in bureaucratic limbo, as is tradition in Canada. Yeah. Yes, of course. Right. Okay. So while we wait for these big structural fixes, the fraudsters keep at it. Right, Dan? It brings me to that hilarious example of when the tenant isn't paying you rent and they can't kick him out.

[00:35:46] Well, it's like keeping a robber in your store, robbing you until the police can come and do something about it. So let's circle back. We have a second case we want to talk about here. The one we hinted at earlier involving HSBC in Toronto, because it reveals a lot about how international and big this is and how organized crime, how it brings in that whole dimension and how even the big banks themselves can fall short or in some cases look the other way. So this is going to be laundering cash through Canadian mortgages.

[00:36:16] And this is fraud for money laundering. So in the mid 2010s through the early 2020s, as Canada's housing market was running hot, a whistleblower at HSBC Bank Canada noticed something odd. At a small branch in Aurora, just up the road from Dan, mortgage applications were pouring in from clients who on paper had enormous incomes from outside of Canada. Now we're talking hundreds of thousands of dollars from companies in China for jobs that

[00:36:44] might have been real, but the clients themselves lived in the greater Toronto area and often had modest day jobs or in some cases, no local employment at all. The whistleblower known only as DM, it's not me, I swear, in reports dug deeper and what they found was astonishing. That one branch had potentially 500 million. It seems like a common number actually in question. That's the cutoff. That's the cutoff until you get in trouble.

[00:37:15] And these question of mortgages were tied to these dubious income claims per news on Y Combinator. And I think that's from Sam Cooper's substack, the Bureau as well. And he actually just won, I think I have it later, but he just won like a big award as well for his investigative journalism. Guy really put his neck on the line for sure. But yeah, that's badass. It appeared this was some sort of coordinated scheme, right? Fake Chinese income to get real Canadian homes.

[00:37:44] The buyers were often newcomers or investors from China and they'd claim to be, say, an executive from a tech firm in Beijing or a business owner, business manager in Guangzhou with a sky high salary, according to better dwelling. They'd provide supporting documents, tax forms, pay slips, employment letters that looked authentic enough to pass. Some of the documents, it turns out, were likely fabricated by scam centers overseas in cahoots with insiders at the bank, according to better dwelling.

[00:38:14] Yikes. So once the mortgage was approved, the buyers didn't suddenly start working a high power job. The money to pay these mortgages flowed in from abroad, likely, of course, from illicit sources. Law enforcement suspect a link to, like, this is kind of crazy, the synthetic opioid and fentanyl trafficking crisis, which generates huge profits in China and around the world. By routing that cash into Canadian real estate, the criminals accomplished two things.

[00:38:44] First, they'd laundered the money and they'd invested it in an asset that often appreciates in value. Toronto real estate was booming at the time and there was no signs of it ever going down. Yeah, and I think, you know, this kind of comes full circle with what we're hearing today in the standoff between Canada and the U.S. with what they're saying with the issues with fentanyl, right? So what's truly worrying is how this could go on under the nose of a major international bank. HSBC is no stranger to money laundering issues globally.

[00:39:12] They actually had a record fine from the U.S. government for money laundering in, I think it was 2013. But here in Canada, did they not notice that one branch suddenly quadrupled its mortgage lending or that so many clients had profiles that just didn't add up? A part-time hairdresser with a half a million dollar four inch salary, no local T4 tax slips to back it up. It raises the question of oversight. According to the whistleblower's account, some branch staff were likely complicit, meaning

[00:39:40] this wasn't just a few bad customers deceiving the bank. It might have been an inside job. Enter Sam Cooper, an investigative journalist who actually, Dan, as you mentioned, just got the King Charles III coronation medal in recognition for his reporting that unearthed foreign interference and infiltration in Canada. Sam Cooper broke this story back in early 2024 and the fallout was significant. Politicians demanded answers.

[00:40:07] One member of parliament, Adam Chambers, called for an inquiry and even wanted RBC, which was the bank that acquired HSBC Canada to set aside $100 million to cover potential fines related to these frauds. It became a national news story linking mortgage fraud to the fentanyl crisis, which let's be real. Those are two things that should never be in the same sentence because some of the money cleared through those mortgages is suspected to be proceeds from international drug trade.

[00:40:36] And I mean, the other piece is even if it's not part of the drug trade, like even if you set aside the whole crime thing, the other piece is that it is Canada's regulators allowing people in China who has capital controls on how much money can leave to go into foreign assets, allowing that to take place where we're supposed to cooperate with other governments to help them enforce their rules. Right. So I do think that it does create a lot of friction potentially between Canada and the U.S. like we're hearing about with their concerns of foreign interference, but also,

[00:41:04] you know, Canada and China where they don't want people to be able to just take money out because here's an example. If I go buy a million dollar house in Aurora and I take all that money out of China, they're going to say, oh, that's going to that's a flag. Right. I'm going to I'm going to crack down on this. But if it's now it's a mortgage. Right. And I'm only paying five grand or six grand a month. It's a lot harder to for them to kind of track that because it's a smaller amount trickling out. And the bigger question is, where were the regulators?

[00:41:32] Well, interestingly, Fintrack did identify a similar mortgage fraud scheme in the GTA involving the Chinese diaspora during the pandemic. They publicly disclosed it in 2023, likely as an anonymized case study, which sounds an awful lot like what was happening at HSBC. So the Canadian authorities were aware in general that this type of thing was happening. Yet HSBC's alleged misconduct wasn't stopped in real time.

[00:41:58] In fact, HSBC wound down and sold its Canadian operations conveniently timed to RBC in 2023. And some skeptics wonder if the swift exit was influenced by these brewing issues. The government approved the sale, effectively allowing HSBC to bow out. Then, even though officials right up to the finance minister were likely aware of the fraud concerns, and it was observed in some of these conversations and testimonies.

[00:42:27] So, you know, it's kind of, it begs the question, right? Is this what Trump was talking about when he goes on and on about foreign interference and national security of Canada as a neighbor? I don't know, but it is a big maybe, right? Yeah. I mean, look, there's definitely an international angle to this, right? Well, Canada was still investigating. U.S. regulators have been far more aggressive, as they tend to be, with our banks when they stumbled abroad. Now, case in point, TD Bank, Toronto Dominion Bank, one of our most well-known big six,

[00:42:56] one of Canada's favorite old banks. I banked with them and they got in a little bit of trouble. 2023-2024, U.S. authorities uncovered that TD's American operations had pervasive and systemic failure in their anti-money laundering, AML, controls for almost a 10-year period. It was so bad that TD had actually ended up pleading guilty to multiple felonies for violating the U.S. Bank and Secrecy Act. The penalties?

[00:43:22] Roughly $3.1 billion in USD in fines, including a record-setting $1.8 billion criminal fine. That's the largest ever under the U.S. Bank Secrecy Act. So there we go. Canadian banks making waves in the U.S. Not for the right reasons. To put things in perspective, they literally capped TD's U.S. subsidiary asset growth until things are fixed. Now, by comparison, the same HSBC we mentioned has faced massive fines in the U.S. as well for

[00:43:51] AML violations. Back in 2012, they paid a staggering $1.9 billion in settlements for failing to prevent Mexican drug cartels from laundering hundreds of millions of dollars. The U.S. Department of Justice found that HSBC had severely deficient AML controls that allowed these cartels to launder $881 million. Well, so they didn't pass that $500 million mark. I guess the cartels can push it a little bit.

[00:44:19] $881 million through their U.S. branches. This shows how U.S. regulators can take a much harder line on AML violations compared to us up here in Canada and our authorities and governing bodies. Wow. Wow. Meanwhile, here in Canada, our regulators have issued some fines too, but the scale is very different. The largest fine ever from FinTrack to a bank was about $7.4 million against RBC in 2023 for shortcomings in reporting suspicious transactions per better dwelling. RBC is a huge bank.

[00:44:49] $7 million is couch change to them, right? And RBC's U.S. affiliate, Citi National Bank, got hit by U.S. regulators for $65 million USD around the same time for the same AML issues. It's almost embarrassing. American authorities penalize our banks tens of or hundreds of millions while our top financial crime agency's biggest penalty to date wouldn't even be a dent in the quarterly profits of these banks.

[00:45:14] Now, this isn't to say that FinTrack is useless, but it's definitely underpowered. It collects loads of data, banks and others file millions of transaction reports, but it doesn't have the real enforcement like a police agency or another governing body that we'd see out of the U.S. It can fine and it can forward intelligence to law enforcement, but it can't actually lay criminal charges, even though sometimes that's clearly what needs to happen.

[00:45:44] Something has been often in the guidance and collaboration between these enforcement groups. As we noted, FinTrack historically didn't push banks to flag mortgage fraud unless it screamed money laundering. So a huge swath of fraudulent activity like false income documents just flies under the radar, not as kind of a not our issue from their perspective. In the HSBC case, FinTrack did eventually flag a similar scheme per better dwelling, but it seems

[00:46:12] that that only came after the fact. So bringing it back to our theme, why might Canadian institutions be lenient or lagging in enforcement? It's a mix of culture and capacity. Culturally, there has been criticism that Canada's banking and regulatory culture is a bit clubby. We have a reputation- Like we go out and have a good time and- Nightclubs, yeah, exactly. Yeah. We have a reputation for a stable, well-run banking sector and perhaps that bred complacency, right?

[00:46:40] You start to feel a bit invincible, a belief that it can't happen here, or if it does, it would be isolated. The fact that multiple big six banks have now been cited with for AML deficiencies, TDs, massive US fines, RBCs reporting lapses, I think CIBC got one as well, and an earlier smaller scandal at other banks indicates that it is happening here. Now, capacity-wise, our enforcement agencies have not kept pace with the sophistication levels of financial crime these days.

[00:47:09] It's only recently that through real estate brokers, mortgage brokers, and private lenders, were even brought under federal anti-money laundering laws. That's crazy because these three people help people make some of the biggest financial decisions of their lives. Now, in 2024, Canada finally required these sectors to report suspicious transactions to Fintrac, which closed one of the many big loopholes. Now, that's a positive step because before that, a lot of dirty money could just throw through

[00:47:38] mortgage and real estate deals with zero oversight. But even with good laws on paper, you need the energy and the muscle to enforce them. And that brings us to the big question here. What can be done? How do we fix a problem where fraud is rampant and where honest homebuyers and investors trying to make a difference or secure their financial future are competing with cheaters and criminals

[00:48:04] and global cartels and organized crime syndicates, where it seems like the bad guys are always one step ahead of the good guys? In our final segment, let's talk about solutions. What experts recommend and what changes might be coming down the pipe. So pass forward, Nick, closing the loopholes and catching the bad guys. Tell me a little bit about what can be done here. Despite the gloomy stuff that we've covered, there are reforms in the works that could turn the tide.

[00:48:32] Let's start with one of the most straightforward fixes, income verification. Earlier, we painted the picture of how easy it is to fake incomes with a bit of a Photoshop and a willing, compliant accountant. Well, the irony is that the accountants in Canada have digital access to the CRA, the Canada Revenue Agency, income data for tax purposes. Every year, millions of Canadians use the CRA online portal system to auto file their tax

[00:48:59] returns with official income slips and professional accountants use the CRA to represent a client system, of course, with client consent to pull those incomes directly from the source. In theory, there's no reason banks can be doing the similar thing, accessing a mortgage application to get the client sign off and paying it directly to the CRA to verify income reported. I think that would be a very low effort, high impact move.

[00:49:28] And it could be a game changer for fraud prevention. No more fake T4 slips or doctored notices of assessment because the lender could see the real deal straight from the CRA. The good news is this idea is gaining traction. In the 2024 federal budget, the government announced it would consult with the mortgage industry on making CRA income verification tool available to lenders, according to Canadian Mortgage Trends dot com. This came after a lot of lobbying from the mortgage industry folks who are fed up with how common document fraud had become.

[00:49:57] One outspoken broker, Ron Butler, I would outspoken would be an understatement on Ron, I think, testified to parliament that there's way too much income document fraud in Canada and that a simple fix would be to let banks securely link to CRA for income checks. Basically, plug the banks into the same system that already exists for tax filing. It's not a moonshot technology. It's very little lift from an infrastructure perspective. It is more about bureaucratic will.

[00:50:24] Imagine if the system gets implemented, a would-be fraudster couldn't just submit a fake PDF pay stub anymore. The bank would say, thanks for the documents. Now, please log in with your CRA credentials so we can confirm your declared income. And if the numbers don't match, well, loan denied. And possibly a report gets filed to the authorities about attempted fraud.

[00:50:49] So it would deter a lot of these casual fraud for shelters, ideally. And for sure, because now there's actual something negative can happen to you. It's not often we say this, but here's a case where the government actually has the data and the means to help stop fraud. It just needs to simply connect the dots. So let's hope they follow through with that one faster than slower on this.

[00:51:15] Yeah, and then thinking about bigger picture reforms, we discussed how Fintrack hasn't been effectively encouraging reporting of certain frauds. A clear recommendation from experts is to clarify and broaden what lenders are expected to report to Fintrack. Right now, if a bank notices a bunch of exaggerated income claims or suspicious patterns that don't obviously involve criminal funds, they're in a gray zone. Should they file a report or no?

[00:51:41] So the federal government could simply say, yes, report all significant mortgage fraud period, regardless of whether it seems tied to drug money. That would give Fintrack a fuller picture of what's happening. I mean, it seems logical, but I guess like, you know, again, capitalism will prevail and like, you know, entities are only going to do what they have to, right? More reports might sound like more work, but if they're high quality, like truly suspicious cases, it means more intelligence for investigators, mitigating losses for the banks, and a better

[00:52:07] chance to connect these ecosystems and the dots between fraud and laundering. Now, there's also this idea you may have heard it KYC. That's a know your customer. So what about a unified KYC verification system? This ties in with the income verification, but it's broader. A standardized way to verify identities, incomes, and documents across all financial institutions.

[00:52:32] Because right now, every bank and lender has its own process, and frankly, some are easier to fool than others. A unified pool, possibly government-backed, could ensure everyone is doing robust checks on IDs and financials in the same way. It would reduce the ability of a fraudster to shop around for the easiest institution to scam. It could even facilitate real-time information sharing between banks and law enforcement.

[00:53:00] For example, if one bank catches a fake employment letter, a system could flag that name or document so other lenders are aware. Today, that kind of sharing doesn't really happen. It's very limited. Privacy and competition sometimes get in the way of that. But when the system is full of fraud, there's a strong case for loosening those walls a little bit in the name of fraud prevention.

[00:53:25] One of the boldest proposals, which we touched on, was establishing a central financial crime agency with actual enforcement powers. Essentially, a Canadian FBI for finance. This agency, if created, could coordinate major investigations, have dedicated experts, and crucially, have the clout to actually bring charges or at least work closely with prosecutors. It could unify efforts across provinces and across different types of crime. Fraud, money laundering, cyber, etc. So cases like Chaudry's don't fall through the cracks.

[00:53:53] Countries in the UK have the National Crime Agency, which tackles organized financial crime nationally. Australia has Austrac, very aptly named, where I'd say we're a bit behind in not having a single body that owns this problem. You're right. But there is movement on this. The government announced the financial crime agency idea, but it's kind of since been in limbo. Now, experts like we've mentioned, Cameron Field argue that needs to be stood up properly

[00:54:21] well with steady funds and a clear mandate as soon as possible so we can kind of stop this. And it shouldn't duplicate what local police or bank investigators do, but rather complete and lead, providing that 30,000 foot view and handling the really complex multi-jurisdictional cases, right? So we get rid of those silos which allow these criminals to operate. Think of it as handling the big fish, like the transnational laundering rings or the massive

[00:54:51] fraud companies. Well, local authorities continue dealing with smaller scale cases, but with support of intelligence from the center. It's all about setting standards. A central agency could oversee training and certification for industry professionals so that mortgage brokers, real estate agents, bankers, etc. all know how to spot and prevent fraud. It could regularly identify emerging schemes and issue alerts, basically keep everyone sharp

[00:55:19] and on the same page because right now some people on the front lines might not even realize that say a client using a newly minted ghost corporation to qualify for a loan is a red flag, right? Totally. But let's not forget that the housing crisis context in solutions. Part of preventing fraud is also alleviating the desperation that leads to it, right? These are, again, normal people committing fraud in crazy amounts.

[00:55:48] The federal government has tied this issue exactly to affordability. Like, and we've done things like allowing longer 30-year amortizations for first-time buyers to buy houses, the new builds, right? We've raised insurance mortgages cap to 1.5 million and other things. Those are controversial and arguably modest steps, but the idea is to give legitimate buyers a better chance so they won't feel pressured to cheat.

[00:56:17] Still, as the article by Cameron Field notes, those measures might help with affordability a little bit, but they won't alleviate the instances of mortgage fraud on their own. Because as long as there's a sales at all costs culture in real estate and a trove of criminal money looking for somewhere to go, fraud will always find a home in real estate here in Canada. So perhaps equally important is tackling the demand side of laundered money and housing.

[00:56:45] That means stronger beneficial ownership transparency. So crooks can't hide behind numbered companies to buy property and stricter scrutiny on large cash transactions. Canada has started to move on these fronts too, for example, setting a beneficial ownership registry for corporations and banning cash purchases of real estate over $10,000 without reporting. But implementation is, as always in Canada, still in progress.

[00:57:09] And a quick note on something already done, including more professions under AML laws as of 2024, mortgage brokers, private lenders, real estate agents are now officially reporting entities to FinTrack. That means they must implement compliance programs, verify client identification, keep records and report suspicious dealings or large cash transactions. This, although it sounds like, yeah, this totally makes sense.

[00:57:36] And as a normal thing, this is a big change because previously a lot of these deals had no watchdog whatsoever. It's a positive step, but, uh, and it will funnel more intelligence to FinTrack and from, uh, FinTrack to eventually law enforcement. But again, it's only as good as the actions that follow it. Ultimately solving this is about coordination and willpower fields article concludes. And I find this line powerful that to combat mortgage fraud and financial crime, we need

[00:58:05] to foster greater collaboration between reporting entities, law enforcement and other stakeholders. It's about sharing info freely and acting swiftly. So the left hand and the right hand can be a unified force and know what one another are doing. No more silos. Right. Exactly. Break down the silos and connect the dots. If a bank notices a trend, tell the others and tell FinTrack. And if FinTrack sees a pattern looping the police and even national security, if it's a big crime,

[00:58:33] obviously, you know, under 500 million will allow it, but if it hits over 500 million, come on, let's do something. And then crucially give it whichever agency is on the case, the resources and backing to see it through so that the next 500 million dollar fraud actually ends with convictions and not shrugs. One thing that sticks with me is how these fraud stories reflect bigger challenges in Canada, housing affordability, globalization of crime, and the need for modern tools in a digital

[00:59:02] economy. Modern mortgage fraud isn't just some paperwork issue. It's a intertwined, you know, housing crisis, opioid crisis, and beyond. And when dirty money or dishonest practices distort our housing market, it affects everyone. Young families priced out of buying, investors trying to create housing for, you know, for tenants. Neighborhoods get destabilized. You know, the integrity of our financial system is at risk. Totally.

[00:59:32] Look, the encouraging part is that awareness, which is how you things usually start, is higher than it's ever been right now. Five years ago, few people had talked about mortgage fraud as a pressing issue. Now, it's front page news. And possibly, maybe after this episode, dinner table conversations, especially as people trade stories of suspect deals or crazy things that they've heard or seen happen in the news. Now, public pressure is building to act.

[01:00:00] Banks, stung by some of the scandals and fines, are investing more in compliance than ever. And technology is making solutions like digital verification finally possible. And journalists and whistleblowers are shining a light on the dark corners where this illicit activity happens. Canada has overcome big challenges in the past by working together. Think of how we tackled the 08 financial crisis or more recently, the pandemic. And even currently, this trade war.

[01:00:26] This is another one of those costs cross-cutting problems. It requires government industry and even us as citizens to say, we value an honest system and we won't tolerate those who corrupt it. And if we can do that, implement smart reforms, enforce the laws with real muscle and keep housing as a place for homes rather than illicit investments, we'll not only crack down on mortgage fraud, but we'll be able to restore trust and stability in the market.

[01:00:51] And maybe, just maybe, make housing a bit more accessible for the people who play by the rules. So last but not least, why this matters for real estate investors. Understanding and responding to mortgage fraud is crucial for several reasons. Number one is market stability. It can artificially inflate property values, creating market bubbles that could eventually burst and lead to significant value corrections as seen in Aurora in 2017 and the entire market probably in 2021, 2022. It creates investment risk.

[01:01:21] Properties acquired through fraudulent means may force see foreclosure or legal complications or have dubious uses there, potentially affecting neighboring property values and area desirability. It creates an importance of due diligence. When purchasing investment properties, you want to verify the history, seller documentation, everything on title becomes even more critical in a fraud-prone environment. And the regulatory impact could change. As authorities implement stricter controls to combat fraud, investors may face more scrutiny

[01:01:48] and documentation and be prepared for that in future transactions. And it also creates market opportunities. Understanding where and how fraud occurs can help investors identify undervalued properties in markets where fraudulent activities have distorted true market values or where these things are being cracked down on or the schemes are kind of breaking because the market's breaking too. So the key takeaway is for investors to stay informed. A cleaner, more transparent real estate market benefits everyone in the long run,

[01:02:15] especially legitimate investors looking to build sustainable wealth through real estate. Yeah, I love that, man. Here's to that. And on that note, that's a wrap for today's deep dive kind of true crime meets mortgage fraud meets real estate investing. Look, mortgage fraud is a complex beast here in Canada. But as we've learned, we can start to tame that beast with the right mix of implementing the right technology, using the right policy and collaborating with the right organizations.

[01:02:44] And that's what we want, everybody. For the reasons that Dan just said, this does nothing but harm to each of us as individuals, as well as to our overall economic and housing market. So thanks for joining us. If you found this episode fun or eye-opening or valuable, share it with others. More people that understand these issues, the harder it is for the fraudsters to hide in the shadows. That's all for the Canadian Real Estate Investor Podcast. I'm Dan. I'm Nick. And stay safe. Stay informed. Don't do fraud. Join realist.ca.

[01:03:14] Leave a review. And we will catch you next time. The content of this podcast is for educational and informational purposes only. It is not intended as financial, legal, or investment advice. Always consult a qualified professional for advice tailored to your unique circumstances. The views expressed are those of the hosts and guests and do not necessarily reflect the opinions of affiliated organizations. Daniel Foch is a real estate broker licensed with Valerie Real Estate Inc.

[01:03:41] Website is Valerie.ca, V-A-L-E-R-Y.ca. And a member of the Canadian Real Estate Association, the Ontario Real Estate Association, and the Toronto Real Estate Board. Nick Hill is a mortgage agent and partner at OWL Mortgage. License number 10317. Agent license M21004037.