The real estate industry attracts fraudsters who devise various schemes to extract money from their victims. They often promise exceptional buying opportunities, get-rich-quick schemes or a solution to financial problems.

The various types of mortgage fraud

Decorative image: Mortgage fraud

Illegal property flipping (inflating the price)

Someone tries to convince you to buy a home at a much higher price than its actual worth. They pressure you to close the sale quickly, presenting the purchase as a unique opportunity.

What this person isn’t telling you is that they or someone they know recently bought the property at a low price and they’re now trying to resell it to you at an inflated price to make a quick profit. If you buy it, you’ll be left owning a property with a value far below what you paid for it.

Straw buyer fraud

Someone asks you to sign a mortgage loan application on their behalf because they have a poor credit score. As your credit is good, the person will get a better interest rate if you help them. In exchange for your signature, they offer you generous compensation in cash.

The person promises to take care of all the payments, including the mortgage, taxes, insurance, etc. All you have to do is sign a few documents, which should only take a few hours of your time. This seems to be an easy, quick and risk-free way to make some money.

However, legally speaking, you are the buyer of the property, making you solely responsible for all payments and any other obligations resulting from the purchase. You didn’t even visit it or have it inspected and didn’t budget for it. If the payments aren’t made, you’re the one who will receive the notices of seizure. But more importantly, your credit score will suffer.

What’s more, the fraudster may have used the property for illegal purposes or simply to turn a profit at your expense.

Foreclosure fraud

If you’re experiencing financial hardship and struggling to make payments, you may be tempted to accept an offer of “help” in the form of a loan. To ensure repayment, the person providing the loan asks you to temporarily transfer ownership of your property or grant a mortgage on it in their favour. However, you’ll be able to remain in your home as a tenant until the situation is resolved.

The problem is that the fraudster then imposes extravagant terms or fees you can’t afford and seizes your home. You lose the equity in your property, which now belongs to the fraudster.

Beware of firms offering financial recovery services

Some services target people in debt and present themselves as “refinance brokers,” “credit counsellors” or “credit repairers.” Their fees can be high and the solutions they offer are limited.

Instead, turn to recognized resources. Refer to our list of professionals, businesses and organizations that can help you find assistance.

Real estate fraud by identity theft

In this scheme, a fraudster uses your personal information to pass themselves off as you in order to do things like:

  • Transfer your property to their name. They can then sell your home or get a mortgage loan using your home as collateral without your knowledge.
  • Buy a property in your name. This property may be used for illegal activities or simply to turn a profit. The mortgage isn’t repaid and the property is ultimately seized without you even knowing it.

In all these cases, your credit score may be severely affected.

Protect your personal information

  • Shred your personal documents before recycling them
  • Store your confidential documents (tax records, passport, social insurance number, etc.) in a secure place
  • Avoid keeping your social insurance card in your wallet
  • Refer to our tips and tricks to protect your personal information

To avoid mortgage fraud

Insight

Check who is offering you a loan

If this person is a mortgage broker, make sure they are authorized to practise. Don’t take the fact that other professionals are present during the transaction as assurance that no fraud is being committed.

End of the insight

Red flags

  • You’re asked to sign documents on behalf of someone else (to act as a straw buyer).
  • Someone asks you to sign a broad power of attorney that contains very few restrictions, which gives them a lot of power.
  • You’re offered a large sum of money for a quick and easy task.
  • You’re asked to sign a partially completed document that someone else will complete later. Not only should you avoid signing this type of document, but you should insist on getting copies of anything you sign.
  • You’re only given verbal guarantees.
  • You’re pressured to act quickly.
  • You’re asked to make cash payments (without proof). Always keep proof of any payments you make.

Tips and tricks to protect yourself

  • Be wary of promises of quick profits or offers of properties at inflated prices.
  • Never let anyone else use your name. Never sign a mortgage loan for someone else, even if you’re promised financial compensation.
  • Do not sign incomplete documents.
  • Avoid cash payments.
  • Visit and inspect any property before purchasing it to avoid unpleasant surprises.
  • If you’re experiencing financial hardship, talk to your current lender about changing certain loan terms or speak to a mortgage broker.
  • Take some time to think things through before making an important decision.
  • Consult recognized professionals (mortgage brokers, real estate agents, notaries, lawyers, etc.) for assistance.

What to do in the event of fraud

Anyone can be a victim of fraud, so don’t beat yourself up.

  • Refer to the You’re a victim of fraud? page to find out what to do, and contact the AMF if the fraud involves purported investments or a mortgage broker.
  • Break off all communications with the person or persons involved and stop sending money.

Be careful: Fraudsters often target their victims more than once. They may contact you claiming to be a lawyer, financial institution or firm specializing in financial fraud cases and offer to recover the money you lost.