Canada's Condominium Magazine

Watch out for mortgage fraudsters: CMHC

Fraudsters are endlessly inventive in coming up with ways to cheat the unwary. CMHC reminds home buyers and mortgage seekers that intentional misrepresentation of financial information is fraud.

Mortgage fraud has become increasingly common in Canada. One estimate, from credit rating agency Equifax, reports a 150 per cent rise in fraud cases in the past year.  Most recently, a Toronto lawyer was fined $30,000 and reprimanded by the Law Society of Upper Canada for deceptive and “grossly deficient” behaviour. He was found to have lied to lenders and concocted phoney real estate deals, but the Law Society stopped short of disbarring him because he had stopped short of fraud “by a hair’s breadth.”

Not much of a recommendation.

The Canada Housing and Mortgage Corporation has put out some tips for consumers, advising that they should resist the temptation to misrepresent information when buying or refinancing a home. Intentional misrepresentation is fraud, and it’s a criminal offence.

CMHC identifies “straw buying” as the most common form of mortgage fraud. This occurs when someone with good credit agrees to put their name on a mortgage application for a home that someone else is buying, usually in return for the promise of a quick profit.

Here are CMHC’s tips on how to avoid becoming part of a mortgage fraud scheme.

  • Never accept money, guarantee a loan or add your name to a mortgage unless you fully intend to purchase the property. If you allow your personal information to be used for a mortgage, even for a brief period, you could be held responsible for the entire debt even after the property is sold.
  • Always know who you are doing business with. If you are buying or selling a home, use only licensed real estate agents and other industry professionals. And never sign anything until you know exactly what you are signing.
  • Determine the sales history of any property you are thinking about buying, and consider having it inspected and appraised. Ask for a copy of the land title search, and find out if anyone else has a financial interest in the home. If a deposit is required, make sure the funds are held “in trust” by the vendor’s realty company or lawyer.
  • Get independent legal advice from your own lawyer or notary. Talk to your lawyer about title insurance and other alternative methods of protection.
  • To protect yourself from identity theft, never give out your personal information until you know who you are dealing with and how your information will be used. Review your mail, bank statements and other financial statements on a regular basis for inconsistencies. Shred or destroy all personal and financial documents before you throw them away. And inspect your credit report on a regular basis by contacting Equifax Canada at www.equifax.ca or TransUnion Canada at www.transunion.ca.
  • Most importantly, be wary of anyone who approaches you with an offer to make a quick profit in real estate. Remember: if a deal sounds too good to be true, it probably is.

More information is available at the CMHC web site, www.cmhc.ca

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