How to Protect Yourself When Purchasing or Refinancing a Home
The promise of “easy money in real estate” can be hard to resist. But consumers who knowingly misrepresent information when buying or refinancing a home could find themselves becoming accomplices to mortgage fraud.
What is Mortgage Fraud?
Mortgage fraud occurs when someone deliberately misrepresents information on a loan application, to obtain mortgage financing that likely would not have been approved if the truth had been known.
There are several different forms of mortgage fraud. One of the most common is when a con artist convinces someone with good credit to act as a “straw buyer.”
A straw buyer is someone who agrees to put his or her name on a mortgage application for a home that someone else will be buying. Mortgage applications for straw buyers also often misrepresent other important information as well, such as their income, occupation and the real source of a down payment. In return for their participation, straw buyers may be offered cash or promised high returns when the property is sold.
While the promise of an easy payday may be tempting, consumers should be aware that in most cases, the fraudsters are the ones who walk away with all the profits, while the straw buyer is left “holding the bag” when the mortgage defaults. Consumers who knowingly take part in these frauds will also be responsible for any shortfall when the property is resold, and could even be held criminally responsible for their misrepresentation.
What Can You Do to Protect Yourself?
To protect yourself and your family from becoming victims of, or accomplices to, mortgage fraud, be an informed consumer. This means:
There are also several simple steps you can take to protect yourself from another common form of fraud: identity theft. These include:
Find Out More
If you suspect that you or someone you know has been the victim of mortgage fraud, contact your local police department immediately.
To find out more about mortgage fraud, visit the fraud prevention section of the Canadian Association of Accredited Mortgage Professionals (CAAMP) website at http://mortgageconsumer.org/protect-yourself-from-real-estate-fraud.
** this article is courtesy of CMHC