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Mortgage Fraud in Canada that Newcomers Must Know About

mortgage fraud in canada

For the average person, it is becoming increasingly difficult to own a home these days. Some consumers have been forced to go outside the box to make their purchases more viable due to the rising barriers to housing. Some people choose to accomplish this by accepting a gift in lieu of a down payment, renting out a piece of their house to cover carrying costs, or signing a rent-to-own contract. There are numerous ways for Canadians to increase the accessibility of their mortgages which generally leads to mortgage fraud in Canada.

So, are you a Newcomer in Canada and seeking a mortgage? There is another approach to assist yourself obtain a mortgage, one that is extremely unwise yet is not absolutely unheard of. You do, after all, know what you can and cannot afford. How much damage can you do if you falsify a few numbers on your mortgage application against the bank, which has billions of dollars? How much mischief can you really cause? 

Truthfully, a lot.

Overall, we would have to strongly warn against engaging in mortgage fraud for obvious reasons but to further hammer home the point, let’s look at how it functions in Canada, how prevalent it is, and how much trouble you’ll be in if you get discovered. Surprisingly, you can both become victims of mortgage fraud or unknowingly commit the same. Let us educate you about all of these as preventive and precautionary measures.

Overview: Mortgage Fraud in Canada

Mortgage fraud comes in many different shapes and sizes. Mortgage fraud can be committed by both the property buyer and anyone they work with, such as a mortgage broker. To avoid being a victim of fraud yourself, it is crucial that you cooperate with trustworthy professionals even if you are an honest property buyer.

People frequently falsify pay stubs, lie about their employment status on mortgage applications (e.g., say they are employed, self-employed, hourly, or salaried), or claim a rental property serves as their principal residence. But that is not the way to get a mortgage in Canada successfully.

You must be as truthful as you can about all aspects of your financial situation while applying for a mortgage. In fact, you are expected to sign your paperwork as proof that you did everything you could to finish it. Mortgage fraud is illegal and has repercussions no matter how slight or insignificant the divergence from the truth may seem to be.

“Straw purchasers” are a different type of mortgage fraud scheme that occurs. A straw buyer is a counterfeit buyer employed to deceive your mortgage lender and get mortgage finance, just like a straw man in the field. It works by having someone with superior financial standing sign the mortgage paperwork in the name of someone who wants a mortgage but doesn’t have good credit or financial standing. By consenting to sign the documents, the straw buyer can be given a kickback of some kind. Even if you sign a mortgage on behalf of another person, the mortgage ultimately belongs to you because your name is still on the document.

It’s crucial for homebuyers to safeguard themselves from fraud, and there are several ways to achieve this.

Mortgage Fraud in Canada is a type of Real Estate Fraud

Although there are other varieties of real estate fraud, customers should be mindful of two in particular: mortgage fraud and title fraud.

Mortgage fraud is when someone knowingly gives a lender false, fraudulent, or incomplete information in order to obtain a mortgage that they might not otherwise be eligible for. This could involve anything from someone claiming to make more money than they actually do to presenting fake documentation or a fake property evaluation.

When a fraudster adopts the identity of a certain homeowner and then utilizes that fraudulent identity to masquerade as the homeowner, Title fraud has occurred. After that, they might take over the home’s title, sell it, or get a mortgage on it or other properties in the homeowner’s name.

Is Mortgage Fraud a Great Problem in Canada?

The banking sector, police, governments, and other entities involved in real estate transactions all take mortgage fraud very seriously. It is challenging to gauge the extent of real estate fraud in Canada because there is no single entity that compiles statistics on a national level.

While mortgage fraud is still a significant problem, it’s crucial to consider the bigger picture. Millions of Canadian homeowners are the owners of mortgages worth hundreds of billions of dollars, and in the vast majority of cases, these mortgages are entirely acceptable.

Do Banks have any Protection Mechanism from Mortgage Fraud in Canada?

The banks are always working to keep you safe from fraud. All banks have fraud and security teams that are available around the clock to make sure that security protocols are regularly improved, technology is updated, and that the banking sector supports law enforcement in investigations to help identify and apprehend criminals.

In addition, task groups against real estate fraud have banks and the Canadian Bankers Association as members across the nation. In order to examine real estate fraud carefully and identify what improvements might be made, both individually and collectively, to avoid fraud and safeguard Canadians, these task teams bring together lenders, the police, the government, real estate associations, and the legal profession. Even while this effort is still in progress, considerable adjustments have already been made to directly halt some cases of real estate fraud.

Fighting mortgage fraud is in all of our best interests. The banks work closely with the police to safeguard homeowners, apprehend offenders, and put in place efficient methods to combat and lessen mortgage fraud in Canada.

The banks conduct their own internal inquiries and will give the police their findings. Additionally, they will cooperate with law enforcement in any way they can in their efforts to stop mortgage fraud. This can entail them testifying in court or giving records and other material they have gathered.

The banks and CBA also participate in task forces and working groups that look at issues with the police, governments, real estate groups, legal professionals, other financial institutions, and other stakeholders.

Do Banks become Victims of Mortgage Frauds?

The property given as security in the event of a mortgage default would be sold by the lender, and this alone might occasionally compensate any money lost through mortgage fraud.

After the property has been sold, if there is a gap, the lender may seek compensation from mortgage or title insurers. A number of professional errors and omissions funds have also been established by organizations like law societies and real estate associations to compensate victims for losses in the event that one of their members is a participant in the crime. To recover some or all of the damages, the bank may also bring legal action against the offenders.

Remember that most of the time a property can still be sold, therefore the banks may only use insurance or cash to pay the difference between the amount of the mortgage and the amount they received from the sale of the property, not the full amount of the mortgage.

How to Protect Me From Mortgage Fraud in Canada?

Protect Your Information from Others

Keep identity thieves away from your personal information. You can do so by adhering to the following practices:

  • Never divulge personal information over the phone, via email, or via text message. However, cases may be different if you have started the interaction or are confident in the other party.
  • Be mindful of your billing cycles. If your bills aren’t arriving on time, contact your creditors.
  • Protect your mail. Place outgoing mail in collection boxes at the post office or at your neighborhood post office. After delivery, immediately take your mail out of the mailbox. In case you relocate or alter your mailing address, make sure mail is forwarded or rerouted.
  • Reduce the number of cards you carry and the identity information you carry.
  • Items containing personal information should be stored securely. Your recycling or trash containers will be combed through by an identity thief. Destroy the receipts, copies of credit applications, insurance paperwork, doctor statements, and credit offers you receive in the mail.
  • Keep your Social Insurance Number (SIN) card in a safe location rather than carrying it around. And only divulge your SIN under dire circumstances. When possible, request to utilize alternative forms of identification.
  • Regularly check your credit report to be sure there are no errors.
  • You can learn if someone has opened unauthorized bank accounts in your name by checking your credit report. Equifax Canada and TransUnion Canada are the two credit reporting organizations that operate in Canada. Credit reporting companies will send you free copies of your credit report if you ask them to. Reports can also be purchased online for a price.
  • To ensure that the title to your house is in your name, perform a property check. You can do this at the land registry office in your province.

Protect Yourself from Yourself

Never purposefully give false information while requesting a mortgage.

  • If you don’t intend to pay the mortgage, don’t put your name on someone else’s.
  • Before signing anything, be sure you understand it. Consult a lawyer if required, or have them translated.
  • Don’t give the vendor of the property your deposit directly. Make sure a lawyer or notary or the seller’s real estate business is holding it “in trust.”
  • Get the land title office’s sales history before making a purchase, or think about having the property inspected and valued. Consult a lawyer to know if anybody else has a financial stake in the property besides the seller. He/she can also inform you about unpaid liens or tax arrears.
  • Never do business with somebody you don’t know. Deal with mortgage and real estate specialists who are accredited or licensed.
  • Get impartial legal or notary advice. Bring up title insurance or other forms of protection with them.

It can be difficult to resist the lure of “easy money in real estate.” Consumers who intentionally give false information run the risk of being implicated in mortgage fraud. The willful distortion of information to acquire mortgage financing will face disapproval.

Anyone who approaches you with the promise of “easy money” in real estate should be avoided. Deals that seem too good to be true usually are. 
Update yourself on the latest real estate and mortgage trends in Canada and stay well-knit with your community in Canada. This will protect you from all types of adversities, be they unfortunate, or planned by any fraud in Canada.

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