Protect Yourself Against Mortgage Fraud
Mortgage fraud is a serious issue that can have a devastating impact
on unsuspecting buyers who are new to the home buying process.
Participating in a scheme that requires you to provide false or misleading
information to a mortgage lender is fraud. Fraud is an offence under
the criminal code of canada.
there are two prominent kinds of mortgage fraud today: one involves scams that attempt to illegally acquire property—‘fraud for property’—and one wherein schemes are designed to squeeze money out of transactions involved when a property is exchanged between buyers — ‘fraud for profit’.
the No. 1 rule to remember when it comes to real estate investments or any investments; if it sounds too good to be true, then it probably is.
Mortgage fraud Processes
Straw Buyers: People who are offered money to lend their identity and are considered phoney loan applicants. They are often offered several thousands of dollars for the use of their name and good credit information. Straw buyers can also sign documents that contain false information or information they cannot prove. For example, stating residency where you do not reside is considered fraud.
Property Flipping: Involves a dishonest seller who artificially inflates the value of a property. This involves fraudulent appraisals, false loan documentation and exaggerated incomes in order to secure loans. The seller inflates the price using a phoney appraisal and arranges for a buyer who can qualify for a large mortgage. Once the mortgage is delivered, the home is sold and another buyer assumes the mortgage. The phoney appraisal remains with the property through multiple transactions, making it difficult to determine the property’s true worth.
The Alberta Mortgage Brokers Association (AMBA) takes mortgage fraud very seriously. AMBA is committed to ensuring its members follow the highest standards of professionalism and the AMBA code of ethics. It is important that you take a proactive approach, as a consumer and a person on the front line, to prevent
yourself from becoming a victim.
there are two prominent kinds of mortgage fraud today: one involves scams that attempt to illegally acquire property—‘fraud for property’—and one wherein schemes are designed to squeeze money out of transactions involved when a property is exchanged between buyers — ‘fraud for profit’.
the No. 1 rule to remember when it comes to real estate investments or any investments; if it sounds too good to be true, then it probably is.
Mortgage fraud Processes
Straw Buyers: People who are offered money to lend their identity and are considered phoney loan applicants. They are often offered several thousands of dollars for the use of their name and good credit information. Straw buyers can also sign documents that contain false information or information they cannot prove. For example, stating residency where you do not reside is considered fraud.
Property Flipping: Involves a dishonest seller who artificially inflates the value of a property. This involves fraudulent appraisals, false loan documentation and exaggerated incomes in order to secure loans. The seller inflates the price using a phoney appraisal and arranges for a buyer who can qualify for a large mortgage. Once the mortgage is delivered, the home is sold and another buyer assumes the mortgage. The phoney appraisal remains with the property through multiple transactions, making it difficult to determine the property’s true worth.
The Alberta Mortgage Brokers Association (AMBA) takes mortgage fraud very seriously. AMBA is committed to ensuring its members follow the highest standards of professionalism and the AMBA code of ethics. It is important that you take a proactive approach, as a consumer and a person on the front line, to prevent
yourself from becoming a victim.
Follow the suggestions below the next time you are thinking about
investing in real estate.
Invest Wisely
Do your homework! Make sure you are using a licensed mortgage broker who is registered under the Real Estate Act in Alberta. Licensed mortgage brokers are required to conform to a code of conduct enforced by the Real Estate Council of Alberta (RECA). Contact RECA at 403.228.2954 to ensure your broker is licensed. Even better choices are AMBA members, they’re all licensed, because they truly believe in helping their clients and adhere to AMBA’s best business practices.
Before you buy, have a REALTOR® show you the listing history on the property. Check the number of sales, price ranges, and community prices.
Get your own REALTOR® or independent representation for your purchase (if the seller objects, something is wrong).
Make sure your REALTOR® is a licensed associate with RECA.
Ask for a copy of the land title search.
In the offer to purchase, include the option to have the property appraised by a designated or accredited member of the Appraisal Institute of Canada. Who is also authorized by RECA.
Make sure your deposit is being held in a trust account.
AMBA is committed to providing you with helpful information regarding the real estate and mortgage markets.
to learn more about mortgage fraud and the red flags, visit: www.amba.ca and www.servicealberta.gov.ab.ca/895.cfm.
Invest Wisely
Do your homework! Make sure you are using a licensed mortgage broker who is registered under the Real Estate Act in Alberta. Licensed mortgage brokers are required to conform to a code of conduct enforced by the Real Estate Council of Alberta (RECA). Contact RECA at 403.228.2954 to ensure your broker is licensed. Even better choices are AMBA members, they’re all licensed, because they truly believe in helping their clients and adhere to AMBA’s best business practices.
Before you buy, have a REALTOR® show you the listing history on the property. Check the number of sales, price ranges, and community prices.
Get your own REALTOR® or independent representation for your purchase (if the seller objects, something is wrong).
Make sure your REALTOR® is a licensed associate with RECA.
Ask for a copy of the land title search.
In the offer to purchase, include the option to have the property appraised by a designated or accredited member of the Appraisal Institute of Canada. Who is also authorized by RECA.
Make sure your deposit is being held in a trust account.
AMBA is committed to providing you with helpful information regarding the real estate and mortgage markets.
to learn more about mortgage fraud and the red flags, visit: www.amba.ca and www.servicealberta.gov.ab.ca/895.cfm.
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