Mortgage Fraud: How to Protect Yourself When Buying or Refinancing
The promise of a quick profit in real estate can be hard to resist. But consumers who misrepresent information when buying or refinancing a home could end up being responsible for any shortfall when the property is sold. If the misrepresentation is intentional, they could also be held criminally responsible as accomplices to mortgage fraud.
The most common form of mortgage fraud, called straw buying, occurs when someone with good credit is convinced to put their name on a mortgage application for a home that someone else will be buying, usually in return for the promise of a quick profit. To protect your name, your credit and your family, Canada Mortgage and Housing Corporation (CMHC) offers the following tips on how to avoid becoming part of a mortgage fraud scheme:
• Never accept money, guarantee a loan or add your name to a mortgage unless you fully intend to purchase the property. If you allow your personal information to be used for a mortgage, even for a brief period, you could be held responsible for the entire debt even after the property is sold.
• Always know who you are doing business with. If you are buying or selling a home, use only licensed real estate agents and other industry professionals. And never sign anything until you know exactly what you are signing.
• Determine the sales history of any property you are thinking about buying, and consider having it inspected and appraised. Ask for a copy of the land title search, and find out if anyone else has a financial interest in the home. If a deposit is required, make sure the funds are held "in trust" by the vendor's real estate company or lawyer/notary.
• Get independent legal advice from your own lawyer. Talk to your lawyer about title insurance and other alternative methods of protection.
Most importantly, be wary of anyone who approaches you with an offer to make a quick profit in real estate. Remember: if a deal sounds too good to be true, it probably is.
Reprinted with permission from RISMedia. ©2013. All rights reserved.