Beware of Mortgage or Title Fraud

Stay Alert: Protect Yourself from Mortgage and Title Fraud

In a world where identity theft and financial scams are increasingly common, homeowners must be vigilant against rising threats like mortgage and real estate title fraud. These crimes can lead to significant financial losses and emotional stress, but awareness and caution can help protect you.

Stay Alert: Protect Yourself from Mortgage and Title Fraud

Mortgage fraud often involves criminals manipulating a property’s value through fake sales and securing loans based on inflated prices. Watch for these warning signs of mortgage fraud:

Someone offers money to use your name and credit to secure a mortgage.
You’re encouraged to provide false information on a mortgage application.
You’re asked to leave parts of the application, such as signature lines, blank.
You’re discouraged from inspecting the property.
Money is rebated to you at closing without disclosure to your lender.

“Straw Buyer” Schemes

A common mortgage fraud variant is the “straw buyer” scheme. Here, someone with poor credit or insufficient funds uses another individual’s strong credit to secure a mortgage in exchange for a payment. These schemes can also overlap with illegal activities, such as drug operations, to finance property purchases.

Impact on Lenders

While mortgage fraud typically affects lenders more than homeowners, recent legal rulings in Canada have held banks accountable for ensuring their mortgages are legitimate. This has put pressure on financial institutions to increase due diligence, but it hasn’t eliminated the risk entirely.

Title Fraud

Title fraud directly harms homeowners, often without their knowledge. Criminals use stolen identities to forge property transfer documents, discharge existing mortgages, and take out new loans. The homeowner is left dealing with the fallout, including foreclosure proceedings and financial ruin.

How to Protect Yourself from Title Fraud

To safeguard your property and finances:

Always inspect properties in person before purchasing.
Research local listings to confirm that a property’s asking price aligns with its features and location.
Work with licensed real estate agents and mortgage brokers.
Avoid agents or brokers with a financial interest in your transaction.
Request a copy of the land title or conduct a historical title search.
Include an appraisal option in your purchase agreement.
Insist on a home inspection, especially for properties with recent renovations or potential illegal use.
Verify receipts for renovations.
Ensure deposits are held securely “in trust.”
Consider investing in title insurance for added protection.

Trust Your Instincts

If something feels off during the home-buying or mortgage process, trust your instincts. Often, a sense that something isn’t right is your first and best defense against fraud. Stay informed, remain cautious, and consult professionals to ensure your financial safety.