COVID-19: Data-driven approaches for managing mortgage fraud risks heightened by the pandemic

In our previous release, COVID-19 | Toward recovery: Six actions for mortgage lenders in Canada, we discussed key actions that we believe mortgage lenders should undertake over the next six to twelve months to contend with the stresses being placed on mortgage books due to the COVID-19 crisis. At a high level, we recommended key client-facing actions that lenders should take to proactively assist customers in need through the mortgage deferral process, ensuring the accuracy and integrity of revised customer lending balances and repayment schedules, and key monitoring activities lenders should consider in assessing the overall health of their mortgage books.

In this instalment, we bring focus to heightened Fraud for Shelter (“FFS”) risks due the current crisis, and provide key considerations lenders should be thinking about in the months and years ahead.

We are observing a set of issues confronting lenders who are simultaneously managing increased complexity in the existing book while attempting to prudently originate new loans in compliance with various regulatory requirements. We believe it likely that the industry will experience a rare event akin to glacier calving: when a body of fraud-impacted mortgages will suddenly “release” from the body of performing mortgage portfolios—a process similar to ice chunks falling from the edge of a glacier.