Mortgage Fraud: Do the New Rules Encourage It?
According to real estate professionals, the new mortgage rules coming into effect on April 19 are likely to result in a dramatic increase in mortgage and real esate fraud.
For investors, purchasing multiple properties will be much more complicated, making it more tempting for real estate investors to cheat. In order to qualify for a mortgage with only 5 per cent down, instead of the newly revised 20 per cent down, investors are likely to not claim the property as an investment. As credit bureaus do not report mortgage debts on credit reports, it’s easy for an investor to lie or for a mortgage broker or banker to overlook the extra bother of doing their due diligence.
There are other types of mortgage and real estate fraud, particularly identity theft. Mortgage fraud is usually practiced in larger urban centres such as Alberta, British Columbia, Ontario and Quebec – places where property has a higher value. While the average case of credit card fraud adds up to approximately $1,200, real estate fraud averages around $300,000.
How to Avoid Being a Victim of Fraud
There are several ways to avoid being a victim of mortgage and real estate fraud:
- Purchase title insurance and ensure that you or your lawyer do a title search.
- If the house has had renovations ask to see receipts and before and after pictures to ensure that the renovations were actually completed.
- Compare real estate listings to make certain that the asking price is reasonable and in line with similar properties in the area.
- Don’t fall prey to high pressure sales tactics.
- Make certain that your mortgage broker is licensed by the province.
As with most fraud cases, go with your gut instinct: if it seems too good to be true, it likely is.
