You may have heard that March is Fraud Awareness Month. Authorities are trying to raise awareness of identity theft , phishing schemes and other forms of fraud. What you may not know is that as many as 1 in 5 Canadians are committing mortgage fraud whether they know it or not.
Fraud for Shelter
Is defined as any time a person “intentionally provides inaccurate, fraudulent or incomplete information to a lender in order to secure a mortgage that they might not otherwise be granted,” according to the Canadian Bankers Association.
You may intend on paying off the mortgage according to the terms in the contract but you may have fudged the numbers a bit to help you obtain the mortgage. Perhaps you borrowed the down payment money and intend on paying it back but you did not declare it as a gift; you may ask a friend to go on the application as a co – borrower when they won’t be living in the house with you. You might be friends with your boss at a small company and ask him to fudge your income to show you make $50,000 instead of $40,000 or alter your employment letter to show you make more than you do or have been on the job longer than you actually have been. This is all fraud.
What can happen to you if the truth comes out? Not only will the lender call the loan and you have to find alternative financing within 24 hours, but you could end up with fraud showing on your credit report. Imagine how unhappy your employer would be if they find out?
Fraud for Profit
You want to buy a rental property but you only have enough for a 5% down payment, nowhere near the 20% required to purchase a property that you don’t intend to live in.
Something that also happens too often is a friend or acquaintance tells you that they want to buy a property, but their credit won’t be in good shape for another 3-6 months. They offer to pay you $5,000 to use your name and credit to purchase the home and then they will take you off title when everything is good. Don’t fall for this. You are what the RCMP call a “straw buyer”. What they do is buy a home from another member of their gang at an over inflated price. They then make 2 or 3 monthly payments and then they take off leaving you stuck with a home you can’t sell for that price and obliged to make up any shortfall between the foreclosure selling price and the amount the lender mortgaged the home for.
Title Fraud
In this case, you are the victim. If you own a home free and clear, the fraudsters steal your identity, take out a mortgage on your property without you knowing it and take off with the funds leaving you to prove that you didn’t refinance your home The legal bills and the damage to your credit rating will be ongoing for a year or two at least.
In conclusion, mortgage fraud is a concern to all of us. It affects us directly as fraudulent mortgages cost lenders on average $300,000 each; a cost that is passed on to us with higher interest rates and fees. Be careful and be aware. Mortgage fraud is a problem for all Canadians who are home owners or potential home owners.
Courtesy of David Cooke, AMP – DLC Clarity Mortgage