These days, with the amount of information shared on the internet and social media, identity theft and Ponzi schemes are happening regularly. Many homeowners are taking the necessary steps to protect one of their largest investments, which is their home. The last thing they want to worry about is yet another way to lose their hard-earned money.

As a homeowner, you need to be aware of two crimes that are on the rise in Canada: Mortgage fraud and real estate title fraud. In 2020, First Canadian Title (FCT) identified and worked to prevent $96 million in suspicious residential transactions. In 2021, that number increased to $231.9 million, in 2022 it was $350 million, and it continues to rise. As a higher cost of living and credit demand also increase, it could lead to a higher probability of fraud.

Mortgage fraud

Some people may think that providing false documents and making false statements when purchasing a home is not a big deal. However, the Criminal Code clearly states that obtaining funds, including a mortgage, by providing false information is a crime.

The most common type of mortgage fraud is when a fraudster obtains a property, then increases its value through a series of sales and resales involving themselves and someone working in collaboration with them. A mortgage is then secured for the property based on the inflated price.

Here are some red flags for mortgage fraud:

Title fraud

When you purchase a home, you purchase the title to the property. Your solicitor registers you as the owner of the property in the provincial land title office.

Title fraud normally starts with identity theft. This occurs when your personal information is collected and used by someone identifying themselves as you. There are several ways criminals can steal your identity without your knowledge, which include:

Sadly, the only red flag for title fraud occurs when your mortgage mysteriously goes into default and the lender begins foreclosure proceedings. Even worse, as the homeowner, you are the one hurt by title fraud, rather than the lender, as is often the case with mortgage fraud.

Unlike with mortgage fraud, however, during title fraud, you haven’t been approached or offered anything – this is a form of identity theft.

Here’s what happens with title fraud:

A criminal – using false identification to pose as you – registers forged documents transferring your property to his/her name, then registers a forced discharge of your existing mortgage and gets a new mortgage against your property. Then the fraudster makes off with the new home loan money without making mortgage payments. The bank thinks you are the one defaulting, and your economic downfall begins.

Ways to protect yourself from title fraud:

How to protect yourself from title fraud when purchasing or refinancing a home:

“Straw buyer” scheme

Another term for mortgage fraud is the “straw” or “dummy” homebuyer scheme. For instance, a renter does not have a good credit rating or is self-employed and cannot get a mortgage, or doesn’t have a sufficient down payment, so he or she cannot purchase a home. He/she or an associate approaches someone else with solid credit. This person is offered a sum of money (can be as much as $10,000) to go through the motions of buying a property on the other person’s behalf – acting as a straw buyer. The person with good credit lends their name and credit rating to the person who cannot be approved for a mortgage to purchase a home.

Other types of criminal activity often dovetail with mortgage fraud or title fraud. For example, people who run “grow ops” or meth labs may use these forms of fraud to purchase their properties.

Red flags

It’s important to remember that if something doesn’t seem right, it usually isn’t. Always follow your instincts when it comes to red flags during the homebuying and mortgage processes.