Mortgage fraud is one of the fastest growing financial crimes! In 2011/2012, mortgages, the largest portion of household debt, were at about $8 trillion in the US, £140 billion in the UK, and $1 trillion in Canada. The portion representing mortgage fraud was an estimated $35 billion worth in the US, £1 billion in the UK, and $400 million in Canada.
Mortgage fraud can be classified in these 3 general categories:
- for Shelter
- for Profit
- to further criminal activities
The types of mortgage fraud include the following. See this Wikipedia article for some explanations.
- Occupancy Fraud
- Income Fraud
- Employment Fraud
- Failure to Disclose Liabilities
- Appraisal Fraud
- Cash-back Schemes
- Working the Gap
- Identity Theft
- Illegal Property Flipping
- Air Loans
- Title Fraud
- Foreclosure Fraud
- Money Laundering
- Value Tampering
Check out these tips on how to prevent and protect yourself from mortgage fraud.
For those who work in the mortgage industry, here are some prevention/detecting tips (summarized from Canada Guaranty)
1. Commute to work
- Is the distance reasonable?
2. Down Payment
- Is it consistent with income?
- If gifted, are there other liquid assets declared that could have been used instead?
- Is it consistent with the type of occupation and job tenure?
- Does the date of hire fall on a weekend or holiday?
- Is signatory using a generic title?
- Is company phone # a cell?
- Is the tenure consistent with borrower’s age?
- Is it an investment property but currently renting home?
- Buying property from current landlord?
6. Credit Report
- Have trade lines been opened over time or at the same time or recently?
7. Sale & Purchase Agreement
- Is property available online (e.g. MLS)?
- Is sale private, arm’s-length?
- Is deposit going to vendor instead of solicitor trust account?
Report it if you see it!
Be a trusted advisor! Recommend buyers obtain Title Insurance:
- Less than cost of fire insurance for a year
- Premium only paid once
- Good as long as you own the home
- Can be transferred to heirs
Won’t prevent fraud, however:
- protect in many ways
- policy picks up all costs to defend innocence and compensate for any loss
Also possible to buy identity theft insurance for very little.
And you can buy bad hair day insurance…. kidding J