Canadians owed approximately $617 billion in outstanding residential mortgages by the middle of last year. With interest rates near record-lows, the rate of mortgage approvals had more than doubled since 2000.
That's a lot of money flowing from mortgage lenders to homebuyers. It's unknown how much of it was being skimmed off by fraudsters.
In a March 2005 report, the Law Society of Upper Canada said that "conservative estimates published back in 2001 suggest that total exposure to the industry, including both conventional and insured loans, was around $300 million. This was almost quadruple the exposure in 1999 and 2000, when exposure was estimated at $73 million and $75 million."
It's unclear how much of the money mortgage lenders dish out winds up in the hands of fraudsters. As the Canadian Bankers Association (CBA) notes on its website, while "there is no central organization that collects statistics nationally, there are some indications that the number of incidents is increasing."
The business is very competitive and unless approvals are made quickly, a lender runs the risk of losing a customer to another lender.
Unfortunately, most people only find out they've been the victim of mortgage fraud when the bank calls up, wondering why payments have not been made on the big new mortgage someone took out on their home.
Other than that, the CBA has some tips on how to protect yourself from identity theft, which is a key way mortgage fraudsters use your home to get cash from the bank.
- Do not give out personal information on the phone, through mail or over the internet unless you have initiated the contact or know with whom you're dealing.
- Before you reveal any personal information, find out how it will be used, and if it will be shared.
- Pay attention to your billing cycles. Follow up with creditors if your bills don't arrive on time.
- Guard your mail. Clear out your mailbox after delivery. If you move or change your mailing address, make sure your mail is forwarded or re-routed.
- Carry only as much plastic and ID in your wallet as you need.
- Tear or shred receipts, copies of credit applications, insurance forms, physician statements and credit offers you get in the mail. Identity thieves pick through your garbage or recycling bins.
- Give your Social Insurance Number (SIN) out only when absolutely necessary.
- Don't carry your SIN card; leave it in a secure place.
- Check your credit report regularly to ensure there are no discrepancies. Reviewing your credit report can help you find out if someone has opened unauthorized financial accounts in your name.
- You can also conduct a property search at your province land registry office to ensure that the title to your home is in your name. It's not just homeowners who can become victims of mortgage fraud. Sometimes lawyers unknowingly take part in real estate transactions that leave homeowners fighting to restore title to their homes — and mortgage lenders trying to recoup the money they handed to fraudsters.
The Law Society of Upper Canada has prepared an extensive list of tips that may indicate a real estate transaction might be tinged with fraud.
Here are a few of them:
Recent property purchase
- The client has recently purchased a property on an all-cash basis and is subsequently placing a mortgage on the property.
- The client has a copy of his or her Transfer/Deed but does not have any other documents relating to the property (purchase documents or a survey).
- The client does not retain the same lawyer who acted in the purchase transaction to act in the mortgage transaction, and the client instructs the new lawyer not to contact the former lawyer.
The agreement of purchase and sale
- The deposit is paid to the vendor directly rather than to the lawyer in trust or to the real estate agent.
- There is no real estate agent involved in the transaction.
- A real estate agent is listed in the agreement but the lawyer does not receive any communication from the agent (e.g. payment of commission).
The transaction
- The client does not have fire insurance on the home.
- The utility companies are unaware of the vendor owning the home.
- The client needs to close the transaction very quickly.
- The client arranges the mortgage through a broker and the brokerage fee is unusually high.
- The client is prepared to pay higher legal fees than normal for the lawyer's services.
- The purchase price is much higher than the purchase price of recent transfers of the same property.
Multiple transactions
- A new client begins referring a number of real estate files to the lawyer and the same parties (purchasers and vendors) are involved over and over in transactions.
- The client indicates that he or she is in the business of renovating homes.
- The same real estate agency appears regularly on the agreements of purchase and sale.
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Related:
CBC stories
- Ontario moves to protect real estate owners from fraud
- Sept. 8, 2006
- Court ruling frees Toronto couple from fraudulent mortgage
- Nov. 1, 2006
- 4 arrested in $4-million mortgage fraud
- Oct. 19, 2005
External Links
- The Law Society of Upper Canada — recognizing fraud in real estate transactions
- The Law Society of Upper Canada — report on mortgage fraud (March 2005)
- Mortgage fraud — Appraisal Institute of Canada
- Ontario Superior Court decision: Toronto real estate fraud case, Nov. 1, 2006
- The Canadian Bankers Association: Real Estate Fraud
- Manitoba Law Reform Commission and Law Reform Commission of Saskatchewan: Consultation paper on private title insurance
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