Valuable Fraud Prevention Tips for Homebuyers and Homeowners
March is Fraud Prevention Month. Canada Mortgage and Housing Corporation (CMHC) has consistently been a leader in the fight against mortgage fraud and offers the following tips to protect yourself from becoming a victim of mortgage fraud.
Misrepresentation of Information
Mortgage fraud occurs when someone deliberately misrepresents information in order to obtain mortgage financing that would not have been granted if the truth had been known.
This can include:
• Misstating one's position or inflating one's income or length of service at their job;
• Misstating employment status (ie. salaried/full time versus contract, part time, hourly or commission-based or self-employed);
• Misrepresenting the amount and/or source of the down payment;
• Purchasing a rental property and misrepresenting it as owner-occupied;
• Not disclosing existing mortgage and/or debt obligations;
• Misrepresenting property details or omitting information in order to inflate the property value;
• Adding co-borrowers who will not be residing in the home and do not intend to take responsibility for the mortgage.
Another common form of fraud 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 on behalf of another person. In return for their participation, straw buyers may be offered cash or promised high returns when the property is sold. Often, straw buyers are deceived into believing that they will not be responsible for the mortgage payments.
Consequences of Misrepresentation
Borrowers who misrepresent information and straw buyers who allow a property to be purchased in their name are committing mortgage fraud and will be responsible for any financial shortfall in the event of default. They may also be held criminally responsible for their misrepresentation.
If you suspect that you or someone you know has been the victim of mortgage fraud, please contact your local police department.
Reprinted with permission from RISMedia. ©2014. All rights reserved.