Nowadays, with the amount of information that is shared on the internet and social media, identity theft and Ponzi schemes are happening regularly. Homeowners are taking the necessary steps to protect one of their largest investments, which is their home.
The last thing you want to worry about is yet another way to lose your hard-earned money. But as a homeowner, you need to be aware of crimes on the rise, known as mortgage fraud and real estate title fraud.
In this first part, we will look at mortgage fraud and “straw buyer” schemes.
Some borrowers may think that providing false documents and making false statements is not a big deal. However, the Criminal Code clearly states that obtaining funds, including mortgages, by providing false information is a crime.
The most common type of mortgage fraud involves a criminal obtaining a property, then increasing its value through a series of sales and resales involving the fraudster and someone working in cooperation with them. A mortgage is then secured for the property based on the inflated price.
Here are some red flags for mortgage fraud:
- Someone offers you money to use your name and credit information to obtain a mortgage.
- You are encouraged to include false information on a mortgage application.
- You are asked to leave signature lines or other important areas of your mortgage application blank.
- The seller or investment advisor discourages you from seeing or inspecting the investment property you are purchasing.
- The seller or developer rebates you money on closing, and you don’t disclose this to your lending institution.
“Straw Buyer” Schemes
Another kind of mortgage fraud is the “straw” or “dummy” homebuyer scheme. For instance, a renter does not have a good credit rating or is self-employed and cannot get a mortgage, or doesn’t have a sufficient down payment, so they cannot purchase a home. They, or an associate, approach someone else with solid credit. This person is offered a sum of money (can be as much as $10,000) to go through the motions of buying a property on the other person’s behalf – acting as a straw buyer. The person with good credit lends their name and credit rating to the person who cannot be approved for a mortgage for a home purchase.
Other types of criminal activity often dovetail with mortgage fraud. For example, people who run “grow ops” or meth labs may use these forms of fraud to “purchase” their properties.
It’s important to remember that if something doesn’t seem right, it usually isn’t – always follow your instincts when it comes to red flags during the home buying and mortgage processes.
Reposted from dominionlending.ca