Mortgage fraud

Fraudsters devise various schemes to extract money from their victims. Some offer their purported services in exchange for up-front fees. Once the money is paid, the fraudsters disappear without providing any services. Here are other tactics used by fraudsters.

Illegal property flipping (inflating the price)

Someone tries to persuade you to buy a home at a price that is much higher than its actual worth. To do this, the person pressures you to close the sale quickly, presenting the purchase as a unique opportunity.

In reality, without telling you, the person or a third party they know recently bought the property and is trying to resell it to you at an inflated price. If you buy it, you’ll be left owning a property with a market value far below what you paid for it.

Straw buyer fraud

A person asks you to sign a mortgage loan application on his or her behalf. The person may need your help because, for example, he or she has a poor credit score. As your credit is good, the person will obtain a better interest rate because your name is on the documents. The person promises to take care of the mortgage payments, taxes and insurance. To thank you for your help, the person offers you a cash amount, often in the thousands of dollars. The transaction only takes two hours of your time, representing two meetings with the notary. What are you risking?

You’ll actually be buying the property, making you solely responsible for all payments and any other obligations resulting from the purchase. You didn’t visit it or have it inspected and didn’t budget for it. Your role was supposed to be limited to lending your name to the mortgage transaction.

You’re now stuck with a property you didn’t want to buy. A short time later, the creditor sends you a notice of seizure of the property as nobody is making the mortgage payments. Legally speaking, you are the owner and the borrower. You were required to make the payments. Your credit score is now badly damaged. The fraudster may use the property for illegal activities for a time or simply to turn a profit.

Foreclosure fraud

You are having problems meeting some of your financial commitments. You receive a call from someone or see an advertisement offering you help—in the form of a new loan, for example. To ensure repayment, the person providing the loan asks you to grant a mortgage on your property in his or her favour. You might also be asked to transfer the property title to the person for the time it takes for the loan to be repaid. 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 equityThe equity in the property is the difference between the property’s market value and all debts secured by that value. For example, if your property is worth $300,000 and you still owe $180,000, the equity is $120,000. in your property, which now belongs to the fraudster.

Beware of firms offering financial recovery services

These firms offer services to people who are in debt. They may also present themselves as “refinance brokers,” “credit counsellors” or “credit repairers.” Their fees can be high and the range of solutions they offer is limited. Instead, see our list of professionals, businesses and organizations that can help you reduce your debt and review your budget.

Insight

Are you struggling to pay down your debts?

End of the insight

Real estate fraud by identity theft

Fraudsters manage to get hold of your personal information, which they use to pass themselves off as you in order to do things like:

  • Transfer your property title to their name. They can then sell your home and pocket the money or get a mortgage loan using your home as collateral.
  • Buy a property in your name. This property may be used for illegal activities for a time or simply to turn a profit. The mortgage is not repaid and the property is ultimately seized without your even knowing it. Your credit score drops significantly as a result.

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 For example, if you have a social insurance card, avoid keeping it in your wallet
  • Refer to our other tips.
Insight

To help you avoid mortgage fraud

If the person offering you a loan is a mortgage broker, check if he or she is authorized to practise. Don’t take the fact that various professionals are present during the transaction as assurance that no fraud is being committed.

Beware if:

  • A person asks you to sign documents on his or her behalf (to act as a straw buyer)
  • A person asks you to sign a power of attorney that contains very few limits on the powers that are granted
  • You are offered a large sum of money to do very basic work that takes little time It’s probably too good to be true
  • You are asked to sign a document containing blank sections that someone else will complete later. Insist on getting copies of the documents you sign
  • You are only given verbal guarantees
  • You have to act fast
  • You have to pay fees in cash Always keep proof of any payments you make
  • A person approaches you about carrying out a real estate transaction
End of the insight

References

Avoid financial fraud

Mortgages

Buying a property

Documentation and tools

Red-flagging Financial Fraud (pdf - 995 KB)This link will open in a new windowUpdated on June 17, 2022

Identity theft insurance

Title Insurance

Legal insurance