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12 Ways to Protect Yourself from Mortgage Fraud
Mortgage fraud is when you (the homebuyer), a mortgage broker, a real estate agent or a lawyer, misrepresents, intentionally withholds facts, lies, or exaggerates information to qualify for a mortgage.
You might be at risk of mortgage fraud because you may not be as familiar with the Canadian mortgage qualification process.
You may also be unfamiliar with the variety of mortgage products available and as a result, you:
- Might get information from people who could take advantage of you by charging you cash fees for assisting you.
- May feel the only option you have is to accept a high interest rate mortgage, or to accept the first offer you receive from a lender, instead of shopping around for a better option.
Proof of Income
Some lenders require at least two years of Canada Revenue Agency Notice of Assessments, making it difficult to prove your income. You may not have two years of income to show lenders if you are:
- A contract or independent worker
- A temporary worker
- A part-time worker
If you fall under any of these types of work situations you are at greater risk of mortgage fraud because it is more difficult to prove your income. You may not have access to the traditional proof of income documents that show employment and income, making it harder to show stability of income from the past two years.
In cases where you are not able to provide satisfactory proof of income, remember it is illegal to fake or falsify these documents.
Lenders need to know the source of the down payment from three months back. If you bring your down payment from outside of Canada, you must produce a paper trail that documents how the money came to Canada.
Fortunately, there are things you can do to protect yourself from mortgage fraud:
1. Find out
Familiarize yourself with the mortgage application process, so you know what to expect.
2. Shop Around
Be sure to shop around for a mortgage, so you find the most suitable mortgage option for your needs and lifestyle.
3. Hire a Professional
Consider using a licensed mortgage professional to help you understand your mortgage options.
4. Pay Attention to Details
Make sure you complete the mortgage application carefully and check that all the information is correct.
5. Get it in Writing
Get everything in writing and get copies of all signed documents. Don’t trust a verbal offer for a loan, with no documents to back it up.
6. Tell the Truth
Don’t submit fake paperwork to get approved for a loan, even if a home buying professional completes the paperwork.
7. Don’t Accept Money
Some lenders or brokers may offer you cash in exchange for choosing to work with them. Beware of these cash offers, there may be other fees for working with them that exceed the cash offers.
8. Never Pay with Cash
Don’t pay cash for anything in the home-buying process. All payments should be made by cheque or other payment method that isn’t cash so that you can have a paper trail of all your transactions.
9. Get a Commitment Letter
Make sure you receive a lender-stamped commitment letter that has the lender’s logo and explains the conditions of the mortgage, and that you’ve complied with all conditions such as getting a home appraisal at least two weeks before closing.
10. Take your Time
Don’t allow anyone to pressure you to sign a mortgage contract before the 48-hour “cooling off” period. You may choose to waive the “cooling off” period if there is less than 48 hours available.
11. Too Good to be True
Ignore “too good to be true” offers or promises that you can get a bigger loan or a low interest rate, especially if you’ve already been declined by other lenders.
12. Hire a Lawyer
Get an independent lawyer to review everything.
Be Aware of the Consequences
If you commit mortgage fraud, there may be serious consequences. If you’re caught before the mortgage loan is advanced:
- You may have already left your former home and now you don’t have a home to move into.
- The lender could cancel the loan, which could cause the seller to sue you or you could lose your deposit.
If fraud is detected after you have the home:
- The lender has the right to “call in” the loan and require you to pay the whole amount of the mortgage immediately. If you can’t pay, you will lose the home through foreclosure or power of sale.
- Your credit score will be damaged, making it very difficult for you to get a mortgage or other loan in the future.
How to Report Possible Mortgage Fraud
If you suspect fraudulent mortgage activity, first report it to your local police or the Canadian Anti-Fraud Centre. If you wish to remain anonymous, you can submit a tip to Crime Stoppers.
You can also report suspected mortgage fraud to the Financial Services Commission of Ontario (FSCO). To learn more about mortgage fraud and how to report it, visit the FSCO Mortgage Fraud website.
March 14, 2018