The Toronto-based Financial Services Commission of Ontario (FSCO) hopes to combat mortgage fraud with a new checklist for licensed mortgage brokers and lenders.

The Ontario regulator released via email the Checklist on Detecting and Preventing Fraud to licensed mortgage brokerages, administrators, brokers and agents in July. The new checklist is meant to strengthen best practices in detecting and preventing fraud when conducting a mortgage transaction, whether it’s for the purchase of a personal home or an investment in a construction project.

“The checklist is emphasizing to mortgage brokers, brokerages, agents and administrators that they can’t ignore what looks suspicious in terms of mortgage fraud,” says Anatol Monid, executive director, licensing and market conduct division, with FSCO.

The checklist was created following the Ontario government’s 2014 report on the five-year review of the Mortgage Brokers, Lenders and Administrators Act, 2006 (MBLAA). FSCO adds that licensed brokers and agents can also expect to see tighter regulations around the detection and prevention of mortgage fraud next year as a result of that review.

For example, currently there is no statutory obligation for mortgage brokers, brokerages and agents concerning how or when to report potential mortgage fraud or to cease such a transaction altogether, says Monid. Under the new regulations, however, licensed individuals will likely have a legal obligation to step away from such transactions.

“The government realizes that combating fraud is important,” Monid says. “Mortgage fraud is big business so anything we can do to prevent fraud from victimizing investors, lenders, borrowers or mortgage brokerages is important.”

The checklist itself is based on industry consultations, best practices and the Standards of Practice regulations under the MBLAA. The document covers topics such as how to verify identification, how to disclose conflicts of interest and private investing and lending requirements.

“This is just another tool to help [mortgage brokers] meet their investor, lender [and] borrower requirements and to be in compliance with the law,” Monid says.

One of those requirements is in the completion of disclosure documents, known as Form 1 and Form 2, which relate to private mortgages, including syndicated mortgages. FSCO updated these disclosure documents in June.

“That [update] is in response to market conditions that we have seen developing with the proliferation of syndicated type mortgages both in their value and their numbers,” Monid says.

A syndicated mortgage is a mortgage held by two or more private investors on a residential or commercial property and where participants negotiate investment returns. Only licensed mortgage brokers may sell such investments.