With the recent rise in mortgage fraud cases in Calgary, the Calgary Real Estate Board (CREB®) is encouraging members of the public to be informed about mortgage fraud red flags and to do their 'homework' to avoid becoming a scam victim.
 

"Mortgage scams are carried out in all different forms and involve a multitude of people; some who don't even know they're being taken advantage of," says Diane Scott, president of CREB®. Participating in a scheme that requires you to provide false or misleading information to a mortgage lender is fraud, an offence under the Criminal Code of Canada. "There are two prominent kinds of mortgage fraud today: one involves scams that attempt to illegally acquire property - 'fraud for property' - and one wherein schemes are designed to squeeze money out of transactions involved when a property is exchanged between buyers - 'fraud for profit'," says Scott. "The number-one rule to remember when it comes to real estate investments or any investments ... if it sounds too good to be true, then it probably is." 
 

Mortgage Fraud Processes

Straw Buyers: People who are offered money to lend their identity, and are considered phoney loan applicants. They are often offered several thousand dollars for the use of their name and good credit information. Some straw buyers may not know that their name was used on a mortgage application. Another form of mortgage fraud through the use of a straw buyer is to have someone sign documents that contain false information or information they cannot prove. For example, if you state that you will be residing in the property and you have no intention of doing so, that is considered fraud.
 

Property Flipping: Involves a dishonest seller who artificially inflates the value of a property. This involves fraudulent appraisals, false loan documentation and exaggerated incomes in order to secure loans. The seller inflates the price using a phoney appraisal and arranges for a buyer who can qualify for a large mortgage. Once the mortgage is delivered, the home is sold and another buyer assumes the mortgage. The phoney appraisal remains with the property through multiple transactions, making it difficult to determine the property's true worth. The end buyer is the victim. They're conned into thinking they are purchasing a sound investment property. " CREB® takes mortgage fraud very seriously and would, if required, cooperate with the Real Estate Council of Alberta (RECA) and law enforcement agencies to assist in any investigation related to mortgage fraud. CREB® is committed to ensuring its members follow the highest standards or professionalism and the REALTOR® code of ethics.

REALTORS are educated in the tell-tale signs of mortgage fraud and are trained to help identify these red flags. CREB® also encourages consumers to take a proactive approach and become familiar with the red flags of mortgage fraud.
 

Some tips for consumers include:
 

- Do your 'homework'! Make sure you are using a licensed mortgage broker
who is registered under the Real Estate Act in Alberta. Licensed
mortgage brokers are required to conform to a code of conduct enforced
by RECA. Contact RECA at 403.228.2954 to ensure your broker is
licensed.

- Before you buy, have a REALTOR® show you the listing history on the
property. Check the number of sales, price ranges, and community
prices.

- Get your own REALTOR® or independent representation for your
purchase (if the seller objects, something is wrong).

- Ask your REALTOR® to provide you with a comparative market analysis
of the property.

- Ask for a copy of the land title search.

- In addition to a comparative market analysis you may want to include,
as part of your offer to purchase, the option to have the property
appraised by a designated or accredited member of the Appraisal
Institute of Canada.

- Make sure your deposit is being held in a trust account.
For more information about the red flags of mortgage fraud, go to RECA's website at www.reca.ca/consumers/ and search for 'mortgage fraud red flags'.