Dominic Darmanin

Cell: 604-788-1476 |

Liar Loans ~ Why Are Borrowers Forced To Lie In The First Place?

What are liar loans? Basically these are loans given to home buyers, car buyers etc who, in order to qualify for a loan, it's necessary that someone deliberately lie about their income, assets, other outstanding loans, or other qualifying questions on the loan application. So either the lender or the borrow are lying or both.

Here in Canada, we've always thought that this was something that those unscrupulous Americans would do which lead to the the World Financial Crisis in 2008. However, the fact is that in Canada the media has been reporting about liar loans since 2015 so the writing has been on the wall at least for these past couple years. Many brokers in the industry consider what are called “liar loans” to be “soft fraud” or “fraud for shelter” which usually involves people having to lie to get a mortgage. These people are thought of as well meaning and genuinely want to be home owners however, can't qualify under conventional loan requirements. Of course, lying doesn't absolve people from being fiscally responsible for their financial affairs in the first place.

So are borrowers forced to lie because the Banks and the Canada Mortgage and Housing Corporation are imposing such stringent requirements that the average working Canadian can't fulfill these requirements? Who are the real culprits here? The citizens who are simply trying to live the dream of owning a home or the banks and CMHC who want to protect their own financial self interests? Or is it the Federal government and its seemingly lax immigration policies which allows immigrant millionaires to flood into the country to snap up “cheep” real estate to diversify their global investments? It's sad that owning a home for many Canadians in the own country is merely a distant dream.

The point is that when people are forced to lie because they want own a home and not pay rent for the rest of their lives, they're caught between a rock and a hard place because if they tell the truth they'll never get ahead. Here's a case where rules mean more than people. Something is blatantly wrong here. Either way, the poor average citizen is committing to a life of servitude either to the banks, other alternative lenders or to a landlord. Paying off a mortgage is a dream for many people especially younger generations and renting is an inevitable consequence of not owning your own home. Tough spot to be in, that's for sure.

Let's take a moment to contemplate who is to blame for these Liar Loans, the borrower or the lender?
As for me, I think the system that forces people to lie to own a roof over their heads is to blame. Something just not quite right here because you know that when another financial crisis happens, it's the borrowers that will be blamed and punished and not the institutions that caused this to happen in the first place – sound familiar?
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