The Borrower Who Wants Income Inflated
Dev is a broker arranging a refinance for Amrit, who runs a small restaurant. Amrit needs a $540,000 loan against an appraised value of $650,000. His declared income supports a loan of about $430,000 under the lender's guidelines. Amrit says: "My cousin will say I work for him and earn $95,000. Just put that down. Everyone does it." He offers to pay Dev an extra $2,000 "for the trouble." Dev's brokerage has a fraud-prevention policy requiring verification of income and reporting of suspected misrepresentation. Amrit's existing mortgage is in arrears, and he mentions he is "trying to consolidate before the bank notices."
1. What should Dev do, and why is this not a matter of client service flexibility?
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Dev must refuse. Submitting or facilitating an income figure the broker knows to be false is misrepresentation and potentially fraud. The extra $2,000 is an inducement to participate in a false application and must be declined and documented. This is not a service-flexibility question: the broker's duty is to present accurate information to the lender, and facilitating false employment or income information exposes Dev, the brokerage, and Amrit to serious consequences.
Dev should explain that the application must reflect verified income, that he cannot use the cousin's statement without genuine verification (pay stubs, tax documents, employer confirmation), and that the file will proceed on documented income or not at all. He should not shop the false information to another lender. The arrears comment is a red flag suggesting urgency to conceal a deteriorating position - another reason to slow down and verify.
2. Outline the fraud-prevention and reporting steps Dev should take.
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Steps: (1) Decline the false income and the payment, and record the conversation. (2) Verify income through independent sources - notices of assessment, T1s, bank statements, and direct employer confirmation if employment is claimed. (3) Note the inconsistencies (claimed employment vs. actual restaurant operation) and the arrears. (4) Escalate to the brokerage's designated compliance contact under its fraud-prevention policy. (5) Do not submit an application containing unverified or false information. (6) If Amrit insists on the false route, decline the engagement and consider whether a report to the lender or regulator is required by policy or law. (7) Keep contemporaneous records of what was said and done. The exam point: the broker is a gatekeeper, and documented refusal plus escalation is the defensible path.