Mortgage Fraud: Identifying Red Flags and Building Trust with Reputable Lenders 

Purchasing a house can be an exciting yet often overwhelming experience, especially for first-time buyers. As you navigate this intricate process to find the perfect home, it is possible to overlook critical details such as signs of mortgage fraud or fraudulent lenders. Given that mortgage fraud has emerged as a critical concern within the real estate industry, it's important to be vigilant about potential signs. But not to worry - I’m here to walk you through the concept of mortgage fraud, how to steer clear of potential pitfalls and offer tips on how to build trust with reputable lenders.  Let’s get started:

What is Mortgage Fraud?

Mortgage fraud is the intentional misrepresentation or concealment of information to gain financing on a mortgage application. One common example is when an applicant, who might have had a history of late payments, falsifies their credit history to enhance their chances of securing a home loan. While this type of fraud is more likely to be seen in borrowers, lenders can be culprits too. Fraudulent lenders, often employing sophisticated methods, can be particularly challenging to identify.

Why Would Someone Commit Mortgage Fraud?

The primary incentive for mortgage fraud revolves around securing property, whether someone is trying to maintain what they currently own or solidify ownership of a new home. For example, an individual may be looking to secure a mortgage loan larger than what they would have otherwise received. On the lender’s side of things, mortgage fraud may be committed purely for financial gain by roping an applicant out of their own money.

Types of Mortgage Fraud

Mortgage fraud can come in all shapes and sizes. As mentioned, it can involve both borrowers and lenders, although it is more common in the latter.  Here are some of the most common types of mortgage fraud:

Mortgage Fraud for Title 

Title fraud involves an individual stealing a homeowner’s identity through forging documents or fake identification. With these falsified documents, the fraudster can assume your home’s title, after which they are able to sell your home, refinance it, or take out a mortgage without you knowing.

Mortgage Fraud for Profit

Mortgage fraud for profit involves a professional misrepresenting their client’s finances.  This typically occurs when the fraudster tacks an inflated price onto the home so they can maximize their profits. This kind of fraud involves the misuse of the mortgage loan process to steal money from homeowners and lenders.

Mortgage Fraud for Housing 

This type of mortgage fraud is not usually a complex scheme, but more often, an individual or family wanting to qualify for a mortgage that is unrealistic for them. They provide incorrect or misleading information on their mortgage application to secure the loan but are likely not in a financial position to make the payments.

Penalties For Committing Mortgage Fraud

The penalties associated with mortgage fraud are dependent on who committed the offence, the severity of the crime, and their past record.  Forfeiture of assets, fines and imprisonment can all occur.  Additionally, they may be found liable for finances associated with a default mortgage.  The Canadian Anti-Fraud Centre allows you to report suspected fraudulent behaviour and provides information on fraudulent scams occurring in Canada.

Are There Any Signs I Can Look Out For?

When you’re looking to secure a mortgage, you want to know you’re working with a lender you can trust. To avoid getting involved in something illegitimate, there are a few things to look out for and be wary of yourself:

Signs of Fraudulent Behaviour in Lenders 

• Fabricated paperwork: Regardless of whether it may seem insignificant, inconsistencies, omitted or incorrect information could be a sign that fraudulent behaviour is occurring. Keep an eye out for small errors in your paperwork.
• Lack of communication: If emails and calls aren’t being answered promptly, this can indicate that the lender isn’t prioritizing your application or doing something suspicious. Ensure you are keeping in consistent contact with a lender when applying for a mortgage.
• A “dream” mortgage: If you are being offered a “once in a lifetime” deal, there’s likely a catch. Ensure you get a second opinion on your seemingly great mortgage deal before you sign any paperwork.

Working with reputable professionals when securing a mortgage offers you support through this process. Mortgage brokers are licensed by the Financial Services Regulatory Authority of Ontario and can help you identify these red flags swiftly and work to rectify the situation without putting your finances at risk.

Need Help Securing a Mortgage?

Mortgage fraud is a very real concern and a potentially easy trap to fall into. If it seems too good to be true, it just might be. To mitigate any risks with your mortgage, I’m here to help. If you’re seeking advice on working with reputable lenders or just want to have a chat about your mortgage, reach out to me.  I’d be happy to talk with you about any concerns you may have.