There are multiple ways you could be implicated in a mortgage fraud.
How it works
One of the most common forms of mortgage fraud is when a con artist convinces someone to act as a “straw buyer”—which means applying for a mortgage on someone else’s behalf. The straw buyer is liable for the mortgage and could be held criminally responsible for their misrepresentation.
Fraud for title (Identity theft)
When you buy a home, you buy the title to the property and you are registered in the provincial land titles registry as the owner of the property. Fraud for title starts with a con artist committing identity theft against a homeowner. This enables the con artist to then use the homeowners’ identity to get a new mortgage on the property, sell the home, or transfer the title of a mortgage-free property into their name. Once the funds are advanced, the con artist leaves with the money and the actual homeowners are forced to take legal steps to prove the fraud and regain ownership of their property.
Fraud for profit (value fraud)
The con artist agrees to purchase a property and then sells it to a willing purchaser at an artificially inflated price. The con artist deceives a mortgage lender or homebuyer by misrepresenting the value of the property or the value of renovations purported to have been completed, or providing forged appraisals to the purchaser, lender or both.
The con artist targets low-income homeowners or those at risk of defaulting on their mortgage. The scammer will offer a “consolidation” plan, in which the scammer will provide up-front cash to the homeowners to cover immediate bills. The con artist then collects “debt payments” that they say will be used to cover the mortgage payments. However, the actual mortgage payments are never made. The con artist may even refinance or sell the property as part of the consolidation and leave with the money. The original owner is left without title to their property and having to deal with debt-collection proceedings.
Fraud for shelter
Lying on a mortgage application in order to qualify for a larger mortgage than your income or credit history allows is called “fraud for shelter”. Some borrowers may think that lying on the application is not a serious issue, but it is a crime. Borrowers who misrepresent information are committing mortgage fraud and will be held responsible to pay any financial shortfall in the event of mortgage default. They may also be held criminally responsible for their misrepresentation.
How to protect yourself
- Be honest on a mortgage application. Providing false information on a mortgage application is mortgage fraud.
- Do not apply for a mortgage for someone else.
- Avoid title fraud by protecting yourself from identity theft. To avoid identity theft, remember to place important identification in a safe place, regularly monitor your financial statements for unusual transactions, safely dispose of mail containing personal information, and keep up to date information on file with the credit bureau.
How to report it
If you suspect you’re a victim, or potential victim, of any of these mortgage frauds, complete the FCNB Submit a Complaint form.
FCNB is responsible for the administration, education and enforcement of provincial legislation that regulates securities, insurance, pensions, credit unions and certain consumer services. If your complaint relates to an area outside of FCNB’s regulated areas, we may refer you to the appropriate reporting agency or organization.