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What You Should Know About Mortgage Fraud

Buying a home is an exciting time. Whether you’re a first-time buyer or a seasoned real estate veteran, it’s hard not to get caught up in the excitement of finding the perfect property. So what happens when the usual home-buying process derails?

Mortgage fraud is a serious crime that can have devastating consequences for its victims. As a home-buyer and consumer, there are ways to protect yourself.

What Is Mortgage Fraud?

Mortgage fraud can take on several forms, making it important to educate yourself accordingly. While no one can guarantee that they’ll avoid becoming a victim, there are ways to protect yourself and decrease your vulnerability.

  • Mortgage Fraud For Title- Usually begins with identity theft followed by the criminal using the stolen documents and information to change the title of a home. By doing this, the fraudster is able to apply for and take out a mortgage, giving them access to the funds without having to incur the payments. The fraudster can then take the money, leaving the title holder unknowingly on the hook for mortgage payments they didn’t know about.
  • Mortgage Foreclosure Fraud- Typically targets individuals who are at risk of defaulting on their mortgages or losing their homes through foreclosure. The fraudster will offer a debt-consolidation proposal that requires the transfer of the property title in exchange for a loan. Instead of using any money to pay bills, the fraudster will typically sell the home or re-mortgage it, leaving the original owner in deeper debt and, in the worst case, without a home.
  • Mortgage Fraud For Profit- A more complex type of mortgage fraud that often involves several parties. In some instances, a person will unwittingly serve as a ‘straw buyer’ and their name will appear on a title for a home they did not knowingly buy. The fraudsters can then take the mortgage funds, leaving the straw buyer responsible for payments that they may not be able to afford.

Can Mortgage Fraud Be Prevented?

Preventing a crime from happening may not always be possible but there are ways to reduce your chances of becoming a victim. As a home-buyer and homeowner, you must do your due diligence before officially agreeing to anything. Take the time to read the fine print, to ask questions, and to flag things that may seem out of place.

Only work with mortgage brokers who are licensed and registered under Alberta’s Real Estate Act. Take the time to find an authorized real estate representative who is willing to answer your questions and provide you with trustworthy guidance.

Never waive a home inspection, ask to see the land title, and trust your instinct if you suspect something is amiss. Working with a real estate lawyer from the initial stages of the home-buying process rather than waiting until closing can help ensure that nothing is missed and that you are protected.

Buying a home often represents one of the largest financial transactions a person will make. Taking the time to do your homework can go a long way in preventing disaster and preserving peace of mind.

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