By mid-2005, Canadians owed $617 billion in outstanding residential mortgages. A lot of money — and a lot of opportunity for fraud. (CBC)

So, you've found that perfect house and you want to move quickly to lock up the deal before somebody else swoops in and grabs your chunk of paradise. You want your bank to approve you quickly, so you can commit to 17.8 years of bi-weekly payments. (You've done your homework and know that taking out a conventional 25-year mortgage and paying every two weeks instead of every month will slice more than seven years off your payments — but that's another story.)

Your banker wants to move quickly, too. He or she wants to lock you up as a long-term client — there are plenty of other lenders out there hungry for your business, and a delay might send you scurrying off to one of them.

Everything looks good and the selling price is in line with recent sales in the area. Your income indicates you can carry the payments. Approval should be just a formality.

And it is. And in the vast majority of transactions, everything goes smoothly.

The Canadian Real Estate Association reports that in September 2006, the total value of homes sold through the Multiple Listing Services was $10.8 billion — a fraction off the previous month's total, but ahead of the same time a year earlier.

According to Statistics Canada, "At the end of 2003, individuals and unincorporated businesses held more than $1.6 trillion in residential structures and land — or about one-third of all assets held by individuals."

By mid-2005, Canadians owed $617 billion in outstanding residential mortgages. Over the past 15 years, residential mortgage credit has grown by an average of 6.4 per cent per year.

A lot of money — and a lot of opportunity for fraud.

On May 3, 2001, Seyed Aboulgasm Rabi and Shohreh Shafiei bought a condo in Toronto. In May of 2004, identity thieves — posing as the owners of the condo — gathered enough fake documents suggesting they had sold the property for $270,000, and took them to a lawyer. The "fake" buyer then secured a mortgage of almost a quarter of a million dollars. Rabi and Shafiei had no idea their home had been sold and the title transferred to someone else.

The fake buyer and sellers disappeared with the money, leaving Rabi and Shafiei living in a mortgaged condo they no longer owned.

Bob Aaron, a Toronto real estate lawyer, says this type of fraud is becoming more common.

"The criminal elements have realized that with a little sophistication, a little organization, they can make a lot more money than bank robbery or drugs or other areas of crime," Aaron told CBC News. "For each deal that happens, where you've got a fraudulent title transfer and a bogus mortgage, you can put a few hundred thousand in your pocket and walk away in a week or two."

It's difficult to catch up with the fraudsters because they simply disappear after using bogus identities to pull off their heists. And police are ill equipped to deal with this kind of fraud.

"When you're dealing with false documents, it adds another interesting part to an investigation, Det. Jim Makris, of the Toronto Police Fraud Squad, said. "The most difficult ones become when a person uses a false name and then we don't know who they are, it's a bit more challenging to try and find somebody."

Makris' squad is made up of 40 officers. Not one deals exclusively with mortgage fraud.

Aaron says this kind of fraud is not that hard to prevent.

"The banks don't often do their due diligence and send out an appraiser," Aaron said. "Often the appraisals are done by averages, by computers, so that if you have a cheap house on a fancy street, the appraisal will show the average of the street, and the house will just slip in without anybody ever actually looking at it."

In the case of Rabi and Shafiei, Ontario Superior Court Justice Randall Echlin ruled they were the innocent victims of identity thieves and were not responsible for a mortgage taken out on the property by scam artists.

"The fraudsters transferred the property and obtained the mortgage from the bank in one transaction, it was incumbent upon the bank to exercise due diligence which might be able to prevent the fraud," Echlin wrote. "Clearly, it did not. Its simple failure to ensure that a proper in-person appraisal involving contact with the occupants of the subject premises would have uncovered the fraud."

He voided the mortgage and said the bank was not an innocent victim of the crime. Lawyers for the bank had argued that the couple was still responsible for paying it.

Due diligence. It's a phrase that pops up continually when it comes to real estate fraud.

The Appraisal Institute of Canada called for it in a report by its task force looking into real estate fraud.

"Upon receipt of an appraisal request, the due diligence by AIC members can be increased without a huge increase in human or financial costs," the report said.

"As part of the due diligence process of obtaining a legal description, property assessment and tax search, the Task Force believes that every property appraised should be supported with a title search (if readily available from your land registry system) attached to the appraisal report."

The report also recommended that appraisers verify photo identification to ensure the seller listed on the property title is the same person who is trying to sell the property.

"This is the value-added service our members can contribute to minimizing mortgage fraud. The public would feel less threatened by title theft if they knew each mortgage application required a full appraisal and that the AIC appraiser would consistently ask for a photo ID in order to ensure the property being appraised corresponded to the registered owner on title," the report said.

The Ontario government recently introduced legislation aimed at protecting homeowners from real estate fraud. If passed, it would ensure that ownership of a property couldn't be lost as a result of the registration of a falsified mortgage, fraudulent sale or a counterfeit power of attorney. Title would be restored to the rightful homeowner.

The proposed legislation would also increase fines for real estate fraud-related offences from $1,000 to $50,000.

Real estate lawyer Morris Cooper says what passes for "due diligence" on the part of mortgage companies is an embarrassment. He says that in almost all cases of mortgage fraud, a simple visit to the home by the bank or Mortgage Company would have prevented a crime.

"If you knock on someone's door and say, 'I'm here to appraise your house because you're selling it next month,' of course the owner will say 'you're out of your mind.'"

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