Blog Layout
What is Mortgage Fraud?
Diane Buchanan • Oct 30, 2017
Have you ever wondered about how to protect yourself from mortgage fraud? Although the chances of you becoming a victim of mortgage fraud is relatively small, if you do become a victim, it will certainly have a long lasting negative impact on your life. So best to be aware of the warning signs. So here’s some information from the Government of Canada provided through the Canadian Mortgage and Housing Corporation that outlines mortgage fraud, and what you can do to protect yourself.
How to Protect Yourself When Purchasing or Refinancing a Home
Beware of promises of “easy money” in real estate. Consumers who knowingly misrepresent information when buying or refinancing a home are committing mortgage fraud.
What is Mortgage Fraud?
Mortgage fraud occurs when someone deliberately misrepresents information to obtain mortgage financing that would not have been granted if the truth had been known. This can include:
- Misstating your position or inflating your income or length of service at your job.
- Stating you are a salaried/full time employee when you are a contract, part time, hourly or commission-based employee or are self-employed.
- Misrepresenting the amount and/or source of your down payment.
- Purchasing a rental property and misrepresenting it as owner-occupied.
- Not disclosing existing mortgage and/or debt obligations.
- Misrepresenting property details or omitting information in order to inflate the property value.
- Adding co-borrowers who will not be residing in the home and do not intend to take responsibility for the mortgage.
- Another common form of fraud is when a con artist convinces someone with good credit to act as a “straw buyer”.
A straw buyer is someone who agrees to put his or her name on a mortgage application on behalf of another person. In return for their participation, straw buyers may be offered cash or promised high returns when the property is sold. Often, straw buyers are deceived into believing they will not be responsible for the mortgage payments.
Consequences of Misrepresentation
Borrowers who misrepresent information and straw buyers who allow a property to be purchased in their name are committing mortgage fraud and will be liable for any financial shortfall in the event of default. They may also be held criminally responsible for their misrepresentation.
What Can You Do to Protect Yourself?
To protect yourself and your family from becoming victims of, or accomplices to mortgage fraud, be an informed consumer. This means:
- Never deliberately misrepresent information when applying for a mortgage.
- Never accept money, guarantee a loan or add your name to a mortgage unless you fully intend to purchase the property. If you allow your personal information to be used for a mortgage, even for a brief period, you could be held responsible for the entire debt even after the property is sold.
- Always know who you are doing business with. Use licensed or accredited mortgage and real estate professionals.
- Never sign legal documents without reading them thoroughly and being sure you understand them. If uncertain, obtain a second legal opinion or, if necessary, the services of a translator.
- Get independent legal advice from your own lawyer / notary. Talk to your lawyer / notary about title insurance and other alternative methods of protection.
- Your lawyer will advise you if anyone other than the seller has a financial interest in the home or if there are any outstanding liens or tax arrears.
- Contact the local provincial Land Titles Office to obtain the sales history of any property you are thinking about buying, and consider having it inspected and appraised. An accredited appraiser will provide the property sales and MLS history.
- If a deposit is required, make sure the funds are payable to and held “in trust” by the vendor’s realty company or a lawyer / notary.
- Be wary of anyone who approaches you with an offer to make “easy money” in real estate. Remember: if a deal sounds too good to be true, it probably is.
There are also simple steps you can take to protect yourself from another common form of fraud: identity theft. These include:
- Never give out your personal information until you know who you are dealing with and how your information will be used. This includes requests for information in person, by mail, or over the phone or Internet.
- Never reply to e-mails or phone calls that ask for your banking information, credit card details, passwords or other personal or sensitive information, particularly if you did not initiate the exchange.
- Review your mail, bank statements and other financial statements on a regular basis to look for any inconsistencies. If you do not receive a bill on time, follow up with your creditors or service providers. You may also wish to contact your local Postal Outlet to ensure your mail has not been held or re-routed.
- Shred or destroy all personal and financial documents before you throw them away.
- Obtain and verify your credit report at least annually by contacting Canada’s two credit-reporting agencies: Equifax Canada at www.equifax.ca and TransUnion Canada at www.transunion.ca.
Reporting Fraud
If you suspect that you or someone you know has been the victim of mortgage fraud, please contact your local police department or The Canadian Anti-Fraud Centre.
On-line: www.antifraudcentre-centreantifraude.ca
Toll Free: 1-888-495-8501
Toll Free Fax: 1-888-654-9426
To find out more about mortgage fraud, visit the fraud prevention section of the Canadian Association of Accredited Mortgage Professionals (CAAMP) website at http://mortgageconsumer.org/protect-yourself-from-real-estate-fraud.
This article was originally published on the CMHC website here.
Being a home owner is excellent, having a huge mortgage isn’t. So, if you have a mortgage that you’re looking to get rid of as quickly as possible, here are four things you should consider doing. Accelerate your payments Making the change from monthly payments to accelerated bi-weekly payments is one of the easiest ways you can make a difference to the bottom line of your mortgage. Most people don’t even notice the difference or increased payment. A traditional mortgage with monthly payments splits the amount owing annually into 12 equal payments. Accelerated biweekly is simply taking a regular monthly payment and dividing it in two, but instead of making 24 payments, you make 26. The extra two payments accelerate the paying down of your mortgage. Increase your regular mortgage payments Chances are, depending on the terms of your existing mortgage, you can increase your regular mortgage payment by 10-25%. Alternatively, some lenders even offer the ability to double-up your mortgage payments. These are great options as any additional payments will be applied directly to the principal amount owing on your mortgage instead of a prepayment of interest. Make a lump-sum payment Depending on your lender and your mortgage product, you should be able to put down anywhere from 10-25% of the original mortgage balance in a bulk payment. Some lenders are particular about when you can make these payments; however, you should be eligible if you haven’t taken advantage of a lump sum payment yet this year. Making a lump-sum payment is a great option if you’ve come into some money and you’d like to apply it to your mortgage. As this will lower your principal amount owing on the mortgage, it will reduce the amount of interest charged over the life of the mortgage. Review your options regularly As your mortgage payments debit from your bank account directly, it’s easy to put your mortgage on auto-pilot and not think twice about it until your term is up for renewal. Unfortunately, this removes you from the driver's seat and doesn’t allow you to make informed decisions about your mortgage or keep up to date with market conditions. So let’s talk about an annual mortgage review. Working through an annual mortgage review with an independent mortgage professional is beneficial as there may be opportunities to refinance your mortgage and lower your overall cost of borrowing. By reviewing your mortgage at least once a year, you can be sure that you’ve always got the best mortgage for you! There is no cost involved here, just a quick assessment and peace of mind. If you’ve got questions about your existing mortgage or want to compare your mortgage to options available today, please connect anytime. It would be a pleasure to work with you.
If you’re like most Canadians, chances are you don’t have enough money in the bank to buy a property outright. So, you need a mortgage. When you’re ready, it would be a pleasure to help you assess and secure the best mortgage available. But until then, here’s some information on what to consider when selecting the best mortgage to lower your overall cost of borrowing. When getting a mortgage, the property you own is held as collateral and interest is charged on the money you’ve borrowed. Your mortgage will be paid back over a defined period of time, usually 25 years; this is called amortization. Your amortization is then broken into terms that outline the interest cost varying in length from 6 months to 10 years. From there, each mortgage will have a list of features that outline the terms of the mortgage. When assessing the suitability of a mortgage, your number one goal should be to keep your cost of borrowing as low as possible. And contrary to conventional wisdom, this doesn’t always mean choosing the mortgage with the lowest rate. It means thinking through your financial and life situation and choosing the mortgage that best suits your needs. Choosing a mortgage with a low rate is a part of lowering your borrowing costs, but it’s certainly not the only factor. There are many other factors to consider; here are a few of them: How long do you anticipate living in the property? This will help you decide on an appropriate term. Do you plan on moving for work, or do you need the flexibility to move in the future? This could help you decide if portability is important to you. What does the prepayment penalty look like if you have to break your term? This is probably the biggest factor in lowering your overall cost of borrowing. How is the lender’s interest rate differential calculated, what figures do they use? This is very tough to figure out on your own. Get help. What are the prepayment privileges? If you’d like to pay down your mortgage faster. How is the mortgage registered on the title? This could impact your ability to switch to another lender upon renewal without incurring new legal costs, or it could mean increased flexibility down the line. Should you consider a fixed rate, variable rate, HELOC, or a reverse mortgage? There are many different types of mortgages; each has its own pros and cons. What is the size of your downpayment? Coming up with more money down might lower (or eliminate) mortgage insurance premiums, saving you thousands of dollars. So again, while the interest rate is important, it’s certainly not the only consideration when assessing the suitability of a mortgage. Obviously, the conversation is so much more than just the lowest rate. The best advice is to work with an independent mortgage professional who has your best interest in mind and knows exactly how to keep your cost of borrowing as low as possible. You will often find that mortgages with the rock bottom, lowest rates, can have potential hidden costs built in to the mortgage terms that will cost you a lot of money down the road. Sure, a rate that is 0.10% lower could save you a few dollars a month in payments, but if the mortgage is restrictive, breaking the mortgage halfway through the term could cost you thousands or tens of thousands of dollars. Which obviously negates any interest saved in going with a lower rate. It would be a pleasure to walk you through the fine print of mortgage financing to ensure you can secure the best mortgage with the lowest overall cost of borrowing, given your financial and life situation. Please connect anytime!
DIANE BUCHANAN
Mortgage Broker
diane@dianebuchanan.ca
250-302-2276
#5 - 160 Oliver Street, Williams Lake BC V2G 1L8