Mortgage Fraud and Identity Theft

Mortgage fraud involves any material misstatement by a borrower in the course of applying for a mortgage loan, which is intended to mislead the lender, or a material misstatement by a lender or purported lender, which is intended to deceive a borrower. The purpose of the fraud may be to acquire a mortgage or to make a profit.

Types:

  1. Fraud for Shelter
  2. Fraud for Profit
  3. Fraud to Other Criminal Activities

 

Fraud for Shelter:

Fraud for shelter occurs when a borrower does not qualify for a mortgage or may only qualify for a mortgage that carries a higher interest rate. In these cases, borrowers may be motivated to make false statements on the mortgage application and provide falsified documents in order to obtain a mortgage.

Preventative Measures (not exhaustive list)

  1. Check job letters for irregularities
  2. Question whether job matches income- refer to http://salarywizard.monster.ca
  3. Check whether postal code matches city
  4. Ensure credit bureau matched employer
  5. Validate pay stub by calling the provider for legality
  6. Check NOAs closely for false information
  7. Look up reverse phone numbers

 

Fraud for Profit

Includes numerous gross misrepresentations including: overstated income, overstated assets, overstated collateral, length of employment is overstated or fictitious employment is reported, and employment is backstopped by schemers.

Preventative Measures

  1. Check if appraisal is valid
  2. Look out for illegal property flipping
  3. Check for air loans (non-existing property loans)
  4. Get title insurance to avoid title fraud

 

Fraud to Other Criminal Activities

Includes:

–          Money Laundering

–          Clandestine Drug Labs

–          Marijuana Grow-ops

 

The Grow-op problems– Police estimate that there are approximately 10,000 grow-ops in the GTA and more than 50,000 across Canada. These properties usually hold approximately 85% of humidity.

Identity Theft

Identity theft involves stealing, misrepresenting or hijacking the identity of another person or business and provides an effective means to commit other crimes.

Preventative Measures

  1. Ensure all documents are shredded prior to tossing them into the garbage
  2. Contact Equifax/Trans Union periodically to check for fraudulent activity
  3. Hold minimal information in your wallet
  4. Always have copies of driver’s license, health card, passport, citizenship cards, bank/credit cards…etc
  5. Examine your financial statements for unauthorized transactions

 

How would you prevent yourself from mortgage fraud and identity theft?

  1. Know the source of the referral
  2. See the client and get to know them
  3. Ask questions to get familiar with client
  4. Make copies of driver license/ citizenship card.
  5. Ensure documents are originally signed and not faxed or scannedback_button
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