In its Q3 Fraud Trends report, Equifax says mortgage fraud rates slipped about 10 basis points year over year to 0.19% of applications, reflecting a slowdown in housing demand and fewer submissions.
But while mortgage-specific cases edged lower, overall fraud across industries has climbed to its highest level in four years, driven in part by a surge in first-party fraud.
Within mortgages, financial misrepresentation remains the dominant risk, accounting for more than three-quarters of detected cases — an 8% increase from a year ago.
Equifax Director of Fraud Consulting, Cherolle Prince, warned that even as total mortgage fraud activity declines, “lenders should focus their attention on verifying all documents, particularly financial ones.”
Misrepresentation dominates as mortgage fraud shifts
According to Equifax, falsified income and fabricated documents continue to drive the majority of mortgage fraud cases. Employment letters, pay stubs, bank statements, tax slips and down payment verification materials were among the most commonly manipulated documents.
“Over 76% of fraud applications contain some form of financial misrepresentation,” said Prince. “We’re also seeing account abuse rise alongside falsified income.”
The report also points to clear regional differences. Fraud rates fell across the country as a whole, but Ontario, Alberta and Quebec continue to carry the highest levels of mortgage fraud. British Columbia, by contrast, has improved after previously ranking among the top provinces for fraudulent activity.
Equifax attributes part of the decline to lower overall activity in housing markets, which has eased application volumes and, by extension, opportunities for fraudulent submissions. But the firm cautions that this lull could be temporary, with misrepresentation trends suggesting fraudsters are adapting rather than retreating.
Lenders face a new verification challenge
Even as aggregate rates dip, Equifax’s data show that mortgage fraud is becoming more concentrated among certain borrower groups.
First-time homebuyers and non-mortgage holders, for example, continue to show a higher incidence of income and document misrepresentation, a sign that affordability pressures may be prompting some to stretch the truth to qualify.
Equifax also continues to see broader fraud ecosystems evolving, including synthetic identity fraud, which often involves “thin files” built from fabricated personal data, and true identity fraud, which is increasingly targeting those with credit scores above 700. Prince said AI tools are now being used to “scale ID fraud attacks,” a growing concern as lenders rely more heavily on digital verification.
As noted earlier, first-party fraud continues to climb and has now reached its highest level since 2021, even as third-party fraud shows a slight decline. Equifax added that payment-related scams, including deposit and bust-out fraud, are also on the rise, particularly in the banking and telecom sectors.
For mortgage lenders, fewer cases don’t automatically signal less risk. Prince stressed the need for stronger document checks to ensure safeguards aren’t relaxed as volumes decline.
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Last modified: October 7, 2025