Protecting Yourself From Mortgage Fraud

#AskIsaacZisckind

You might think the process is safe because of the documentation required to establish ownership of the property and title insurance to verify the legitimacy of the transaction, but a recent news story about the arrest of four people for committing mortgage fraud illustrates the dangers to homeowners and lending institutions. In fact, mortgage fraud has increased by 52 percent throughout Canada with Ontario being one of the provinces hardest hit by this criminal activity. It is important to understand how mortgage fraud occurs and what you can do to protect yourself from it.

What is mortgage fraud?

Mortgage fraud is the deliberate misrepresentation of information knowing a lender will believe it to be true and rely upon it in approving the loan. Misrepresentations frequently relate to the following:

• Income
• Employment
• Work history

In some instances, the person applying for the mortgage may be acting on behalf of another party without revealing this information to the lender. So-called “straw buyers” are used to shield the identity of another person who would be unable to qualify for the financing. Some mortgage fraud schemes go to great lengths, including the creation of fake title insurance and property insurance certificates to trick the lender.

Allowing yourself to be used to obtain a loan for another person or misrepresenting information you give the bank could result in criminal charges being filed against you. Even if you are fortunate and avoid criminal charges, you could be sued by the lender for any damages they incur as a result of the fraud.

Avoiding mortgage fraud

You can protect yourself from becoming a victim of mortgage fraud as well as avoid inadvertently committing in by following a few simple rules:

• Make certain any information, financial or otherwise, you include in your mortgage application is accurate and truthful.
• Report anyone offering you money or other inducement to co-sign, guaranty or apply for a mortgage on behalf of another party.
• If applying for a mortgage, never sign any documents prepared by another party unless you first read and understand the contents.
• Seek legal advice from a lawyer unaffiliated with your lender or any of the parties associated with your mortgage application.
• Unless you are dealing directly with a lender, work only with mortgage brokers and mortgage agents licensed through the Financial Services Commission of Ontario. Licensing means the person working on your behalf meets minimum education, training and experience guidelines set by the government. Mortgage brokers also must demonstrate their knowledge by passing a written exam before receiving a licence.

It is a good practise to look at your credit report once a year. This allows you to identify any suspicious transactions, such as a mortgage in your name, that you did not engage in or authorize. You can get a free copy of your credit report from one of the credit-reporting organizations operating in Canada.

What to do if you become a victim?

Title fraud is another scheme that takes advantages of homeowners by assuming the identity of a property owner and using it to take title, transfer title, or obtain financing on property. Title fraud may occur as part of a mortgage fraud scheme.

If you believe you might be the victim of title fraud or mortgage fraud, contact the Canadian Anti-fraud Centre to report it. You can also make a report to provincial or local police departments.

Real estate lawyers in Ontario

The real estate lawyers Diamond & Diamond have years of experience successfully handling all manner of transactions associated with real estate. If you believe you have become the victim of mortgage fraud or title fraud, our lawyers offer afree evaluation of your situation with advice about how they can help. Call now at 1-888-INFO LAW or contact us here.