Mortgage fraud seemed rampant just a few years ago but much less lately having since died off after consumer awareness and systematic changes have made the crime more difficult.
Down from an average five per month a couple of years ago, only 18 new investigations into real estate fraud have been opened up this year to date by the Law Society of Upper Canada. However, tough economic times, a more electronic environment and hot real estate markets still offer attractive venues for crooks, especially in Ontario. Criminal Intelligence Service Canada defines mortgage fraud as: the deliberate use of misstatements, misrepresentations or omissions to fund, purchase or secure a loan.
Simply put, mortgage fraud is any scheme designed to obtain mortgage financing under false pretenses, such as using fraudulent or stolen identification or falsifying income statements.
Many instances are not reported to the proper authorities, and real estate is a cozy home for fraud due to the amount of legal processes, different people or associations and information involved. But now that more mortgage brokers bear more responsibility due to new regulations in transactions, they take on more of the losses financially than the victims themselves.
Buyers are advised to move with caution when it comes to using unestablished companies or individuals offering guaranteed protection against foreclosure via an advanced fee, as well as to be aware of the top four scams according to industry professionals:
•The classic bait and switch
The mortgage is advertised with an ultra low rate that ends up being higher in actuality when everything is said, done and closed.
•Loan flipping
Repeated refinancing of a mortgage when a homeowner can’t keep up with payments, the lender flipping the loan will ask for large fees and penalties every refinance, and the fees and are usually based on the entire mortgage amount driving the borrower deeper in debt.
•House flipping
A house flipper targets a first time buyer or one with credit issues, earning trust with their alleged knowledge and experience, arranging the loan and taking care of the details on their own but the buyer ends up with a poorly reconstructed or “fixed-up” home worth nothing close to the original loan the flipper then walks away with, leaving the homeowner to pay off a mortgage much larger than the house is worth.
•Identity theft through personal information harvesting
More and more transactions are being done online instead of person to person. Titles can be searched for and registered online, and mortgage information can be stored on computers, making it easier for criminals to obtain what they need.
Mortgage fraud is definitely down but not out, and as technology progresses so does the crime itself. Doing the homework and research to find an appropriate and reputable lender is definitely worth the time it takes to ensure that you and your investment are protected.
The Toronto Real Estate Board released the October 2009 statistics for the GTA. The number of sales for the month of October was 8,476 in the GTA compared to 5,155 in October of 2008, representing a 64% increase.
