Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.
Issue link: http://digital.canadawide.com/i/254794
fraudawareness 22 | winter 2014 mbabc.ca MortgageBroker did complete and title to the home was transferred to the straw buyer. e law is now clear in B.C. and the true owner of the property will have his or her title restored without the mortgage that was granted to the straw buyer. While being a victim of this sort of crime is never a pleasant experience, the Torrens system and Land Title Act do put things right. In the 2008 transactions, the legal costs of restoring title were borne by the Assurance Fund established under the Act. (See Title Security in BC on the Land Title and Survey website, ltsa.ca/cms/title-security-in-bc) A more common variation on mortgage "fraud for profit" is where the fraudsters do intend to take possession of the property. In those cases, the main intention is to use the property itself as a base for criminal activity such as a drug laboratory or marijuana grow- op. No imposter is needed but the organizing minds may again use a straw buyer to be the nominal owner and borrower who they coach through the mortgage-borrowing process. e true owner does get the sale proceeds and the straw buyer may get a relatively small fee. Once the deal has completed, the mortgage payments are typically paid until the grow- op is discovered or the home is abandoned, usually with substantial damage. Once again, the straw buyer remains personally responsible for the loan. ough the registration of the mortgage is valid and the bank can foreclose, the value of the security for the loan can be seriously com- promised due to the damage to the home. e second and more common kind of mortgage fraud is oen called "fraud for shelter." e buyer/borrower does want to purchase the property with the intention of using it as a residence or as an income- producing rental property. e fraud comes in the deliberate manipulation of the mortgage- lending process to obtain loans that would not otherwise be granted. ose examples can range from a slight exaggeration of assets or income when completing a loan application form to the complex creation of forged documents and the involvement of compromised professionals in the lending community. In any event, the intention is to get a loan in spite of lending guidelines and prudent business practices. ey are more likely to be one-off transactions for the borrowers – though it is oen the case that the loans they obtain have in common a willing "coach" in the lending industry who has gained a reputation as someone who can get "difficult" deals done. e new owners do usually have the intention of making payments as the property is being used for legitimate purposes. Problems arise, though, as the payments may be beyond the ability of the borrower to pay. e lender's mortgages are enforceable but at the time of foreclosure, it can turn out that the value of the property was exaggerated and a complete recovery of the money loaned may not be possible. For lenders, legal professionals, and everyone involved in real estate-lending transactions, verification of information is critical. Unfortunately, in "hot" competitive lending and real estate markets, to obtain business it can be tempting to cut corners on normal due diligence. One mortgage lender used this slogan in advertisements, "Did you just read all these words? APPROVED!" Fortunately in 2014, everyone involved is much more diligent. Careful checking of supplied information against public records and credit bureau reports exposes many attempts to improperly obtain loans. Education programs and regulatory oversight of lenders, mortgage brokers, realtors, and legal professionals have greatly improved standards in the mortgage industry. Very useful tools such as lending risk- analysis reports are available through companies such as Landcor (landcor.com) to alert lenders to potential frauds. It is also common to use Internet searches to verify representations and to check properties. Free online Geographic Information Systems ( GIS) can quickly give visual information on most properties. Is there really even a home on the property? For current property owners, it is important to be alert to any indication that an unauthorized transaction is taking or has taken place. For example, pay attention to any change in the delivery of mail to your home; fraudsters will oen file change of address notifications with the post office so correspondence to the new "owner" does not go to the home. In many of the matters with which I am familiar, some unusual event gives a clue that something is afoot. If you have any concerns at all, check with your local notary who can quickly do a title search to verify ownership. And of course for anyone tempted by an offer of participation as a straw buyer or an imposter, it is important to remember that whatever is offered is too good to be true. e money paid will not compensate for the civil and criminal legal sanctions that follow. Ron Usher is the General Counsel for e Society of Notaries Public of BC. His career experience includes private practice in Vernon and Vancouver. Ron is also an Adjunct Professor at Simon Fraser University, teaching in the Master of Arts in Applied Legal Studies Notary education program. n is no perfect solution to the problem of mortgage fraud. We can, however, keep in mind the wisdom of two maxims: "Trust but verify" and "If it sounds too good to be true, it probably is." ere p20-23_Mortgage Fraud.indd 22 14-01-27 11:41 AM