Types of Mortgage Fraud
Mortgage fraud occurs when individuals or institutions deceive lenders to secure financing. Common schemes include inflation of income, misrepresentation of property value, and false documentation. In Canada, the Criminal Code (Section 380) treats mortgage fraud as fraud by false pretence, with penalties up to 14 years imprisonment.
Key fact: The Royal Canadian Mounted Police (RCMP) and provincial fraud units coordinate investigations into real estate fraud schemes.
Identity Theft in Real Estate
Identity theft poses significant risks in property transactions. Fraudsters may use stolen personal information to obtain mortgages, register fraudulent liens, or misrepresent ownership. Victims may discover fraudulent mortgages against their properties years after transactions close.
- •Stolen SIN and credit information used to obtain mortgages
- •Fraudulent mortgage registration against real property
- •False identity documentation in application materials
Straw Buyer Schemes
A straw buyer is someone who purchases property on behalf of another party to conceal the true buyer's identity or financial situation. Schemes may involve collusion between buyers, agents, and lenders. Victims of straw buyer fraud may face mortgage fraud charges unknowingly.
Warning: Straw buyer arrangements often violate mortgage conditions and constitute fraud, exposing all parties to criminal and civil liability.
Inflated Appraisals
Appraisal fraud occurs when property valuations are artificially inflated to justify larger mortgage amounts. Corrupt appraisers may collude with agents or lenders to overvalue properties, exposing lenders to losses and creating negative equity for buyers.
Canadian appraisers must comply with professional standards set by the Appraisal Institute of Canada (AIC). Falsifying appraisals violates these standards and exposes appraisers to disciplinary action and criminal charges.
Predatory Private Lenders
Predatory private lenders target vulnerable borrowers with high-interest loans, excessive fees, and predatory terms. These lenders often exploit borrowers unable to qualify for conventional mortgages, leading to unsustainable debt and property loss.
Red flags for predatory lending:
- •Interest rates exceeding 15% annually
- •Fees totalling 5% or more of loan amount
- •Pressure to sign documents without legal review
Legal Protections
Canadian law provides protections against mortgage fraud through criminal statutes, civil remedies, and regulatory oversight. Fraud victims may pursue civil claims for damages, seek mortgage cancellation, and report perpetrators to authorities.
Criminal Code remedies:
Section 380 of the Criminal Code provides for restitution orders, property seizure, and imprisonment for mortgage fraud. Victims may file complaints with the RCMP or provincial police.
Civil remedies:
Victims may pursue civil lawsuits for damages, seek equitable remedies such as mortgage cancellation, and recover legal costs. Statutes of limitations vary by province but typically range from 2 to 6 years.