> “I am going to reveal potential mortgage fraud at HSBC Bank Canada and possibly some employees benefited from the fraud, financially pocketing thousands of dollars, which I call the proceeds of crime.”
> FINTRAC’s study doesn’t say that Canadian banks knowingly issued fake-income mortgages to Chinese diaspora buyers in Toronto. But in an interview, D.M. said banking staff are trained to guard against fraud, and the loan application packages he reviewed in Aurora beggared belief.
> The Bureau’s review of HSBC Canada emails and D.M.’s text messages, shows he came to believe numerous employees at the Aurora branch had direct knowledge of faked Chinese income mortgages, and a veteran manager with oversight of more than 10 Greater Toronto branches knew about broad and questionable mortgage lending for Chinese diaspora clients.
> Pointing to specific examples, D.M. claimed that another branch colleague had admitted processing numerous loan applications without meeting his clients, because a branch manager delivered her subordinates foreign income client applications so “they did not have to get sales themselves.”
> “She said yes, she knows specially in Mainland China there is a team who would even answer emails and phone calls verifying [Chinese income] but it’s a sophisticated and well organised scam,” D.M. 's email to HSBC Canada managers says. [...] “When I asked for such a serious issue if she raised a HSBC confidential [complaint] or not she evaded my question,” D.M. wrote. “Now we all love numbers, but I don't think the bank will like these kinds of numbers achieved through this way.”
Sounds like that branch is compromised
The USA Federal system of mortgage loan gurantees has been gamed seriously, over and over since the 80s. It is a whack-a-mole for enforcement. All the parties close to the transactions have exactly the wrong incentives, most of the time. One of the defendants in a recent "pay cash to get your kid into elite school via fake sports" scandal was a mortgage broker in San Diego County. The Judge after reviewing evidence, reportedly told the man on the record "you are a thief." etc
American financial regulators are much more comfortable letting banks fail than their Canadian or European counterparts. (In part this is because of the sheer diversity of banks we have.) Being fined out of existence is a real possibility for an American bank. That shapes behavior.
"Since 2015, the whistleblower concluded, more than 10 Toronto-area HSBC branches had issued at least $500-million"
It's not a branch. It's the whole bank. And you can safely infer it's not the only bank.
1. It is very common in Canada for a person with wealth acquired outside the country to apply for a home loan. At the time I was approved as a guarantor for a home loan for over half a million CAD, I had only been in the country for 2 years, and had no credit history with any Canadian institution (out of laziness I just was added to my wife's accounts as a signer and cardholder when I moved). They accepted copies of my American credit history and bank statements, but had no real way to verify their truth. In the US, I don't think that (relatively) wealthy immigrants wanting a home loan are nearly as common. Richmond, BC is a great example of this: avg home price is 1.5mm and 60% of the residents are immigrants.
2. Canadian mortgages are refinanced every five years, traditionally (it is possible to get a longer term, but very uncommon). Combine this with the fact that Canadian real estate has ALWAYS gone up (until now), and financing a home really wasn't a risky thing. If a bank didn't like a customer, they could refuse to refinance after 5 years. If a bank foreclosed, they were basically guaranteed to be made whole.
I'm skeptical here, given how closely the US and Canada work together, both US and Canadian banks share an incredible amount of info with each other and not solely because of cross-border commerce. There is also a non-trivial number of US citizens living and working in Canada so there are services available to them given their special tax requirements.
In the 3 banks I've worked with in Canada, all were completely unable to access my American credit history.
The governments do share tax data, but AFAIK the banks have no way to link "John Smith SSN:123-45-6789" to "John Smith SIN:098-76-54321". They even have my US SSN number since Canadian banks report to the IRS.
Edit: here's experian explaining it: https://www.experian.com/blogs/ask-experian/u-s-credit-histo...
If 10 people bid for a house, it's the guy in China lying about their income setting the house price when they win, by what HSBC is doing. This will have an outsized effect on the market.
I don't know if it's a legal requirement, but I sure know I had to hand over all of _our_tax information to the bank to validate income when getting a mortgage in the US. You have to sign a form saying the bank is allowed to pul your data from the IRS; you're not just handing over paperwork and promising that it's legit.
it's not like they're claiming these people are unable to pay.
hail free market.
We found a random mortgage specialist (a Chinese lady) at RBC. Without knowing the full picture of my brother's income situation, she immediately suggested that she could get the mortgage approved regardless, just needed to fake some documents.
It was astonishing how she went straight to the point so quickly to someone she met the first time.
She also said a lot of people has non-taxed income and needed a way to get a mortgage before the real estate price becomes out of reach.
So definitely not just HSBC.
Laws like "you must live in the house for 1 year before selling" meant they just sent a relative to live there free before selling for higher price.
Like investors and companies chasing ever higher profits, there's a bunch of people that think the house they own should be worth 100000% more by the time they sell it.
Even had a gen x friend be like "Well I pay rates (council services fees) while I own the property so it should be worth more!"
Bruh, getting your rubbish taken away while you live there doesn't add value to the fucking house. Otherwise I could claim paying my electricity bill while I live there does too.
What language do these Chinese tech workers speak at their jobs?
The real people harmed were the Canadians trying to start a family who got outbid on the house.
Have always gone up expect for when they haven't. Nationally, real estate prices dropped precipitously in the early 1980s. And the Toronto housing crash of 1989 was a complete meltdown. It took until the 2010s for prices to finally return to where they were in 1989!
It’s probably the biggest purchase in your life so it makes sense you want to know all details.
Sure thing bud.
It definitely isn't Richmond though.
I guess a more accurate way to put it is that there is almost no one working in banking or any mortgages currently written where a major correction has happened. Canada wasn't whacked in 2008 nearly as bad as the US, and the early 1990s property corrections were much more regionally focused (Toronto got the worst of it), in Edmonton, 1989 and 1990 prices increased more than 20%. Basically there is no one with first hand experience in managing an upside-down housing portfolio.
Basically, for most property markets in Canada, plowing your money into property has been a historically better bet than the TSX.
Granted, the market had ramped up so quickly, and then crashed so fast, that the number of underwater mortgages was likely small – and probably haven't come up for renewal yet. So, you're right that there isn't much management experience, and may never be.
If you cherry pick the localized data, even the worst off suburbs of Toronto you see a dip of just over 22% with a pretty quick reversion to the mean. If you look at metro areas, none of the cities in Canada saw greater than 10% drops from 2022 peaks, and they have all recovered from the bottom.
The irony is the US talks a lot about financial transparency for other countries, but the US itself is the preferred place if you're looking to launder money.
If you break it out into type of home, it shows that the average price drop is about ~10% for any given market. This shows that consumers in 2022 shifted buying preferences from expensive home types to cheaper home types. This makes a lot of sense given the push for multi family housing and rising interest rates.
The value of individual housing didn't change 30%, it was mostly just a market shift towards cheaper housing. If people shift from buying Mercedes to buying Kia, the average transaction price for a car will fall a lot, but that doesn't mean that Mercedes is on sale for cheap.