Protecting yourself when purchasing real estate is essential as homeownership in one of the largest financial investments you’ll ever make. And while owning a home is one of life’s most exciting milestones, there are also risks involved including becoming a victim of mortgage fraud.
Mortgage fraud is a growing problem in Canada. Sophisticated scammers who prey on innocent homebuyers and homeowners are becoming more prevalent and their deceptive practices harder to detect. It’s, therefore, critical to become educated, stay informed and learn to identify red flag warnings for fraud.
Mortgage fraud occurs when a mortgage is obtained using false pretenses – where someone deliberately misrepresents or omits key information in order to obtain mortgage financing that would otherwise not be approved.
As a homebuyer and homeowner, it’s imperative that you understand the significance of mortgage fraud, common mortgage fraud schemes and their implications so you can protect yourself against predatory action.
One of the most common types of real estate fraud involves the ownership – or ‘title’ – of the home. Title fraud occurs when the ownership of the property is fraudulently changed using a false or stolen identity, or when forged documents are used allowing a criminal to illegally transfer the ownership to themselves or someone else without your knowledge. Once this occurs, the fraudster can re-mortgage your home or sell your home without your consent.
5 ways to help avoid mortgage fraud
During the homebuying process, you’re required to provide complete and accurate information on all documentation. Make sure you read and understand each document before signing. If you’re uncertain at any time, ask questions and/or consult with a lawyer. Never sign a blank document, provide false or even slightly exaggerated information and don’t let anyone encourage you to provide false information.
Here are some steps you can take to prevent fraud:
- Use trusted homebuying professionals. When putting your homebuying team together, be sure to ask friends and family for referrals and ensure you check references. Some members of your team are required to hold a professional licence – make sure they do – and verify their licence is up to date with the applicable regulatory body.
- How will the information be used? Before you reveal any personal information, ask how it will be used. Be wary of suspicious emails asking for personal details and avoid sharing personal information over the phone or via social media.
- Review your bank and credit card statements as well as your credit report regularly. This will allow you to spot any discrepancies. Notify your financial institution or credit-reporting agency immediately should you notice any irregularities. Also, keep track of automatic withdrawals from your bank accounts and follow up if your bills don’t arrive on time.
- Shred all documentation containing your personal information rather than throwing it in the garbage or recycling bin.
- Purchase title insurance. As the name implies, title insurance protects you against losses associated with title fraud, as well as other issues such as claims, liens or even mistakes in public records. You can also conduct a property search with the land registry office to ensure that the title to your home appears in your name.
If you believe you’ve been a victim of real estate fraud or feel that something just wasn’t right during the mortgage financing process, document all your concerns, file a police report and notify the Canadian Anti-Fraud Centre.
Have questions about protecting yourself from mortgage fraud? Answers are a call or email away.