How does somebody avoid becoming a victim of mortgage fraud?

Mortgage fraud involves tricking a financial institution into lending money when it otherwise wouldn’t. Sometimes, it involves individuals attempting to buy houses they can’t afford.

If a lender ever asks you to fill out a mortgage application form, it’s very important that you be completely honest. Knowingly inflating your income, misrepresenting the amount or the source of your down payment, purchasing a rental property and then claiming it as owner-occupied, failing to disclose existing debts or even misstating your job position on an application can all constitute mortgage fraud. You can be held both financially and criminally liable.

Or mortgage fraud can happen when con artists approach an individual with good credit to act as a “straw buyer” and apply for a mortgage in exchange for cash or a promised share of the money collected from reselling a property. Criminals will simply pocket the mortgage money and vanish, leaving their straw buyers with nothing except massive debts to repay and possible criminal charges or civil lawsuits.

Your best overall defence is to beware of get-rich-quick opportunities — stay aware and informed and use common sense. If a deal sounds too good to be true, it probably is. A few pointers to avoid mortgage fraud:

    • Never sign a document unless you’ve read it, and understand it thoroughly. Always get a copy of any documents you sign;
    • Never sign blank documents;
    • Never knowingly misrepresent information when you apply for a mortgage;
    • Never allow somebody else to use your name and credit in exchange for a payment; and
    • Always use licensed or accredited mortgage professionals, real estate lawyers and registered real estate salespeople and brokers.

When you’re ready to buy, I strongly recommend working with a registered real estate rep for a number of reasons. Real estate salespeople and brokers must be registered with the Real Estate Council of Ontario if they wish to practise their profession, and they know they can be fined, removed from the business or face criminal charges for unethical or illegal actions.

RECO takes ethics and professionalism seriously, which is why we establish education requirements to become a salesperson or broker, conduct routine inspections of brokerage offices, look into complaints from the public about the conduct of salespeople and administer an insurance program that includes consumer deposit protection.

It’s also a good idea to hire a knowledgeable real estate lawyer who can inform you about title insurance, tell you if anyone besides the seller has a financial interest in the home or if there are outstanding liens or tax arrears. You may also wish to personally visit the local provincial Land Titles Office for a sales history of any property you’re considering.

Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at, follow on Twitter @RECOhelps or on YouTube at


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