By Isabel Vives, Senior Manager, Fraud Risk, CMHC
March is Fraud Prevention Month. As the snow begins to melt and temperatures climb, “for sale” signs will begin to pop up everywhere. This signals the start of home buying season. If you plan on buying a home, avoid being the victim of mortgage fraud by remembering some simple steps.
If you’re a mortgage professional, CMHC has tools and information to help you combat mortgage fraud and prevent fraud at initiation.
Mortgage fraud occurs when someone deliberately misrepresents information to get mortgage financing that would otherwise not have been approved. This can take several forms, for example:
- misstating one’s employment
- inflating income, length of service at their job
- agreeing to be a “straw buyer” (when one person signs onto a mortgage application on behalf of another person)
Borrowers who commit mortgage fraud will be responsible for any financial shortfall if the mortgage defaults. They may also be held criminally responsible.
Protect yourself from this kind of activity by being an informed consumer.
Remember: if a deal sounds too good to be true, it probably is. Follow these guidelines to protect yourself and your family:
- 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.
- Always know who you are doing business with. Never sign anything without understanding exactly what you are signing.
- Use a licensed or accredited mortgage and real estate professional.
- Get independent legal advice from your own lawyer/notary. Talk to them about title insurance and alternative methods of protection.
- Contact the local provincial land titles office to obtain the sales history of any property you are thinking about buying. Consider having the property inspected and appraised.
- Talk to your lawyer to find out if anyone other than the seller has a financial interest in the home. Your lawyer can also tell you if there are any outstanding liens or tax arrears.
- If a deposit is required, make sure the funds are payable to and held “in trust” by the vendor’s realty company or by a lawyer/notary.
Guard against all kinds of fraud by:
- storing your credit cards in a secure place
- choosing passwords and PINs that are difficult to guess and changing them frequently
- shredding bills and sensitive documents before recycling them
- being vigilant when it comes to suspicious emails or messages asking for money or personal information
Contact your local police department or the Canadian Anti-Fraud Centre if you suspect that you or someone you know has been a victim of mortgage fraud.