How to Avoid Mortgage Fraud

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Real estate fraud is happening at an alarming rate in Canada, according to a recent report published in the Vancouver Sun. The report from consumer credit company Equifax uncovered roughly $400 million worth of mortgage fraud in Canada last year. And many experts believe that’s just the tip of the iceberg. These figures represent only frauds that Equifax was able to uncover within their client holding.

Data from the report revealed that nearly two-thirds of all fraud committed in Canada last year was real-estate related, thanks in part to more stringent lending practices. In fact, mortgage fraud increased by 150 percent in 2011.

Why Now?

Mortgage fraud tends to track hot housing markets; as credit becomes more difficult to secure, people often resort to desperate measures in order to seal a housing deal. Mortgage fraud is also more apt to occur in more concentrated urban areas. According to the Criminal Intelligence Service Canada, a federal agency responsible for sharing intelligence between police forces, the highest rates of fraud were reported in areas of Quebec, British Columbia and Alberta.

Common Types of Real Estate Fraud

Mortgage fraud comes in all shapes and sizes. Two of the more common types involve the artificial inflation of a property’s value and the use of false identities. Just five years ago, Equifax had identified 300 fake accounts in their national database. Today, that number is over 2,500. Criminals will also take to falsifying documents, lying about their income or stealing another person’s identity.

How to Protect Yourself

The best way to protect yourself is to work with a team of licensed real estate professionals. A lawyer, realtor and mortgage broker will help ensure that all legal precautions are taken. Home hunters should also take extra precaution when surveying a hot market. The following are six tips to help you avoid becoming a victim of mortgage fraud:

1) If it looks like a duck and quacks like a duck…

Beware of unusual offers, especially those that involve your personal information. Never lend your identity to anyone or sign documents that you don’t fully understand. Always consult with legal counsel prior to solidifying any agreements.

2) Don’t be fooled by the numbers.

Always perform a comparative market analysis of your property prior to making an offer (your realtor will be able to help with this process). If the home is priced well above  the neighbourhood average, it’s time to start asking questions. This could mean that someone is flipping the property using a fabricated appraisal.

3) Never assume anything.

Especially the honesty of a seller. Get your own realtor or independent representative to weigh in on the offer. If the seller objects, you know something is wrong.

4) Do a land title search.

Title fraud is a growing concern for Canadian home owners. To protect yourself, do a land title search. This will notify you of the name of the property owner and any mortgages or liens against the property. Title insurance can also be purchased for additional protection.

5) Invest in an appraisal.

As an extra precaution, write an appraisal request into your purchase offer. Make sure you specify that you want the appraisal to be conducted by a member of the Appraisal Institute of Canada.

6) Protect your money.

Make sure your money is being housed in a real estate trust by your realtor or lawyer. This will help protect you until the deal closes.

Protecting yourself from mortgage fraud isn’t as difficult as you might think. For more help with your mortgage, contact your broker and secure a mortgage pre-approval.

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