Since March is Fraud Prevention Month, we thought we would educate you on one of the most common types of fraud that home buyers are at an increased risk of encountering — mortgage fraud.
Simply put, mortgage fraud occurs when someone deliberately misrepresents personal information in order to obtain a mortgage. Some examples of this may include:
- Inflating your income or misrepresenting your income (ex: stating salaried when you are on contract)
- Misrepresenting your position at work
- Inflating the length of time you have been at your job
- Leaving out debts or mortgage loans you currently hold
- Inflating your property value
- Misrepresenting where your down payment is coming from or how much it is
- Listing co-borrowers on the loan who will not be residing in the home or who never plan to take responsibility for the mortgage
These may all sound like things that the mortgage applicant would do to commit fraud, but in actuality, mortgage lenders can be at fault for committing these falsities in order to get their clients financed. But as CMHC puts it, consequences of misrepresentations on mortgage applications by either party can be serious.
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. [CMHC]
Here are some simple steps to protect yourself from mortgage fraud:
- Never misrepresent information on a mortgage application
- If you don’t intend to fully purchase a property, don’t accept money, loans or add your name on a mortgage application for that home
- Never sign legal documents without reading them thoroughly and being sure you understand them.
- Get independent legal advice from your own lawyer our counsel
- There is no such thing as “easy money” when it comes to real estate investing, so be wary of any offers like this
You can report mortgage fraud to the Canadian Anti-Fraud Centre:
Toll Free: 1-888-495-8501