By The Canadian Press
VANCOUVER � Runaway housing prices and a highly competitive mortgage industry are contributing to a growing problem with mortgage fraud across the country, experts say.
But it�s a complex issue and one lenders don�t really want to talk about.
'Mortgage fraud is a problem, and I don�t think anybody can deny it,' said Ken Fraser, executive director of investigations for B.C.�s Financial Institutions Commission, which investigates fraud complaints involving mortgage brokers and real-estate agents.
'A lot of figures have been bandied back and forth over the years about the degree of it, but I don�t think anybody has a figure on it. It is definitely escalating.'
Mortgage fraud is any act that convinces a lender to grant a mortgage that would have been rejected if the truth were known. For instance, providing a letter of employment listing an inflated salary, or a note from a relative confirming a gift toward the down payment on a purchase when the money is really a loan.
This is known as 'shelter fraud.' It happens when borrowers are trying to buy a home for which they don�t qualify.
In a hot real-estate market, these frauds are rarely detected and don�t result in a loss to lenders because the mortgages are repaid.
It�s 'fraud for profit' that is a growing concern for lenders � and in some cases, innocent property owners are the victims.
In these instances, unscrupulous mortgage brokers, bankers, real-estate agents, lawyers or appraisers may use false appraisals to increase the value of a property.
They are able to sell it a few times through fake documents and get a mortgage for a far higher amount than the real value of the property, leaving the ultimate purchaser to pay the bills.
Or false documents or identities may be used to mortgage homes for marijuana grow-ops or crystal meth labs.
Criminals also can use identity theft to pose as the owner of a property at the provincial land-title office. They then are able take out a mortgage on the home or sell it to an innocent purchaser and make off with the proceeds.
Earlier this month, a Surrey, B.C. woman pleaded guilty to mortgage fraud after posing as the owner of a vacant lot and taking out a $170,000 mortgage on the property.
The mortgage was arranged through a mortgage broker but another broker figured out the scam and alerted police.
The fraudster was ordered to repay the Royal Bank for the mortgage as well as $2,500 to cover the costs of the elderly Vancouver woman who owned the land and had to fight to clear her title. Two other suspects are still before the courts.
"The problem with mortgage fraud is you’re dealing with identity theft," said Barry Elliott, Ontario-based creator and coordinator of Phonebusters, a national police-sponsored call centre that tracks fraud.
"You can be victimized with a mortgage on your property and not be aware of it, or have property purchased in your name and not even know about it," he said.