Mortgage Broker Regulators' Council of Canada

What is Mortgage Fraud

Mortgage fraud may take many forms, including the following examples:
Straw buyers
Providing false information on a mortgage application is considered mortgage fraud. One of the most common forms of fraud is when a deceitful individual convinces someone to act as a “straw buyer.” Applying for a mortgage on someone else’s behalf is called being a “straw buyer.” The straw buyer is liable for the mortgage and could be held criminally responsible for their misrepresentation.
Fraud for shelter/housing
Lying on a mortgage application in order to qualify for a larger mortgage than your income or credit history allows is called “fraud for shelter”. Some borrowers may think that making a false statement on the application is not a serious issue, but it is a crime. Borrowers who misrepresent information are committing mortgage fraud and will be liable for any financial shortfall in the event of default. They may also be held criminally responsible for their misrepresentation.
Fraud for title (Identity theft)
When you buy a home you buy the title to the property and you are registered in the provincial land titles registry as the owner of the property. Fraud for title starts with a deceitful individual committing identity theft against a homeowner. Identity theft occurs when your personal information is collected and used by someone identifying himself or herself as you. Committing identify theft enables the deceiver to then use the homeowners’ identity to get a new mortgage on the property, sell the home, or transfer the title of a mortgage-free property into their name. Once the funds are advanced, the deceiver leaves with the money and the actual homeowners are forced to take legal steps to prove the fraud and regain ownership of their property. Subsequently, you can protect yourself from title fraud by protecting yourself from identity theft. To avoid identity theft, remember to place important identification in a safe place, regularly monitor your financial statements for unusual transactions, dispose of mail containing personal information safely, and keep information on file with the credit bureau up to date.
Fraud for profit (value fraud)
The deceiver agrees to purchase real property and then flips it to a complicit purchaser at an artificially inflated price. The deceitful individual deceives a mortgage lender or homebuyer about the true value of a property by misrepresenting the value of the property, or the value of renovations purported to have been completed, or providing forged appraisals to the purchaser, lender or both.
Foreclosure fraud
The deceiver targets low-income homeowners or those at risk of defaulting on their mortgage. The scammer will offer a “consolidation” plan in which the scammer will provide up-front cash to the homeowners to cover immediate bills. The deceiver then collects “debt payments” that they say will be used to cover the mortgage payments, but the actual mortgage payments are never made. The deceiver may even refinance or sell the property as part of the consolidation and leave with the money. This results in the original owner without title to their property and having to deal with debt-collection proceedings.