We cover fraud from time to time on RATESDOTCA, and for a good reason. It’s all over the place, and your money and personal information are at increasing risk. Why? Because all it takes to rip someone off these days is a computer, Wifi, and a remotely clever idea.
In the financial sector alone, fraud incidents are worth $650 million a year in Canada.
Of that, mortgage fraud makes up $400 million. About 13% of fraud incidents in Canada are mortgage-related, and they take up two-thirds of the dollar value of financial scams.
There’s $1.7 million worth of attempted fraud activity every day in Canada, according to Equifax Canada.
Experts say mortgage fraud can be quite sophisticated, and organized crime might be behind the big growth in this type of fraud. Fraudsters often target high-value homes in big cities. And their work is fueled by increasing housing prices in places like Vancouver, Toronto and Montreal.
What is Mortgage Fraud?
Mortgage fraud is, generally speaking when someone obtains a mortgage by providing false information. That means you could be accused of fraud if you lie on a mortgage application. A criminal will lie on an application and take a loan they have no intention of paying off, obtain this loan using the identity of someone who’s not aware of the loan, either through identity theft, or a family member using personal information, such as that of a spouse or an elderly relative (often this is coerced if they owe a debt to a criminal).
Often the mortgage is obtained with a number of fake mortgage documents like false paystubs and made-up bank statements. Often, the down payment on the home is also from a fraudulent loan the borrower has no intention of paying off.
Frequently, financial professionals such as brokers, agents, lawyers and bankers are involved in these schemes. One US study found that 80 percent of mortgage fraud was helped by industry insiders.
Often, these mortgages are never paid off — or perhaps one or two payments are made before the criminal takes off with the money.
What is Title Theft?
This specific form of mortgage fraud hurts not just lenders such as banks, but homeowners. In title theft, a criminal creates false documents that transfer the ownership of your home — they’ll also have to get your identity documents as part of the scheme. They use more fake information to discharge your mortgage (often they target expensive homes with small mortgages) and get a new mortgage. You as the homeowner only find out about this transaction months later when the bank comes looking for default payments on this new, fraudulent mortgage.
How to Avoid Mortgage Fraud
Getting involved in mortgage fraud is a terrifying and painful situation. You need to make a few moves to protect yourself against being a target.
Here are some tips:
- Be aware of identity theft and never give away personal information like your SIN number unless you are 100% sure who is getting the information.
- Check your bank statements regularly and your credit score once a year to be sure there’s no funny stuff going on in your name.
- If you are buying or selling a home, only work with reliable, trustworthy lawyers, agents and bankers. While some of the biggest fraud stories have involved longtime real estate experts, getting a personal referral reduces the risk. If your professional does anything that seems unusual or fishy, ask questions and report the behaviour if you don’t get good answers.
Get Protected with Title Insurance
One of the biggest ways you can protect yourself from fraud is by purchasing title insurance when you buy a home. Title insurance covers you if the ownership of your home is put in question in any way — such as from fraud. It also covers things like needing to rebuild part of your home due to city permit problems, issues related to land because of not having a land survey.
Mortgage fraud is a scary subject, but one you should educate yourself on. Read up this and other types of fraud at places like the Canadian Anti-Fraud Centre and do your best to be informed about the topic so your won't ever become a victim.