How to Protect Yourself from Mortgage Fraud

Mortgage fraud is a real threat in Canada, and whether you're a first-time buyer or experienced homeowner, knowing how to protect yourself is essential for a safe home buying experience.

Types of Mortgage Fraud

Fraud FOR Housing (borrower-driven):
Misrepresenting information to qualify for a mortgage you otherwise wouldn't get.

• Inflating income
• Hiding debts
• Using fake employment letters
• Misrepresenting down payment source

Fraud FOR Profit (criminal enterprise):
Organized schemes that defraud lenders, often involving straw buyers or inflated appraisals.

Both are illegal. Both have serious consequences.

Red Flags to Watch For

In Your Own Transaction:

• Someone suggests "adjusting" your income on applications
• Pressure to sign documents you haven't read
• Requests to leave income/employment sections blank
• Unusual down payment arrangements
• Being asked to act as a nominee buyer

In People Approaching You:

• Promises that sound too good to be true
• Pressure to make quick decisions
• Requests for upfront fees before service
• Vague explanations of the process
• Reluctance to provide written agreements

Common Fraud Schemes

Title Fraud:
Someone steals your identity to put a mortgage on your property or sell it without your knowledge.

Straw Buyer Schemes:
You're asked to "help" someone qualify by putting your name on their mortgage.

Appraisal Fraud:
Property values are artificially inflated to extract more money.

Down Payment Fraud:
False documentation showing funds that don't exist or come from undisclosed sources.

Protecting Yourself: Title Fraud

Title insurance:
Always purchase title insurance. It protects against:

• Fraud and forgery
• Existing liens or encumbrances
• Errors in public records

Monitor your title:
Periodically check your property title for unauthorized changes.

Guard personal information:
Shred documents with personal details. Don't share SIN carelessly.

Protecting Yourself: Transaction Fraud

Never sign blank documents.
Every field should be completed before you sign.

Read everything.
If you don't understand something, ask questions. Delays are better than fraud.

Use your own lawyer.
Don't use a lawyer recommended by the seller or an unknown third party.

Verify wire instructions.
Before sending money, call your lawyer at a number you independently verify.

Keep copies of everything.
Document all communications and keep copies of all signed documents.

What Legitimate Mortgage Professionals Do

A legitimate mortgage broker or lender will:

• Verify your documents independently
• Ask questions about your financial situation
• Provide written disclosures of fees
• Never suggest you misrepresent information
• Work with your timeline, not pressure you

If You Suspect Fraud

Contact your lender immediately.
They have fraud prevention teams.

Report to police.
Mortgage fraud is a criminal offense.

Contact FINTRAC.
The Financial Transactions and Reports Analysis Centre of Canada investigates financial crimes.

Notify your lawyer.
They can help protect your interests.

Consequences of Participating in Fraud

Even "minor" fraud has serious consequences:

• Mortgage default and foreclosure
• Criminal charges (up to 14 years imprisonment)
• Civil liability for losses
• Damaged credit for years
• Loss of professional licenses (for industry professionals)

FAQ

Q: What if I accidentally provided incorrect information?
A: Honest mistakes happen. Notify your lender immediately. The key is intent—fraud requires deliberate misrepresentation.

Q: Can I report fraud anonymously?
A: Yes. Crime Stoppers and other reporting mechanisms allow anonymous tips.

Q: Is my lawyer responsible for catching fraud?
A: Lawyers have duties but aren't fraud investigators. You remain responsible for information you provide.

Q: What if a family member asks me to co-sign or act as buyer?
A: Be very cautious. Even helping family can expose you to legal liability if fraud is involved.

Q: Do legitimate mortgage brokers ever ask for documents?
A: Yes—identity documents, income verification, and down payment proof are standard. The difference is how they're used (verification vs fabrication).

What's Next

Stay vigilant throughout your mortgage journey. Work with reputable professionals who follow proper lending processes and never ask you to misrepresent your situation.