Mortgage fraud has become a billion-dollar industry in Canada and a growing concern to the real estate and financial sectors, CanWest News Service reported Friday.
Although the monetary impact is difficult to quantify, such organizations as the Quebec Association of Real Estate Agents and Brokers suggest mortgage fraud amounts to be an estimated $1.5 billion a year across the country, reports said.
The Real Estate Council of Alberta estimates there was about $275 million in fraudulent mortgage loans in Alberta in the fiscal year 2001-2002 based on transactions investigated, according to reports.
In the United States, the Federal Bureau of Investigation has said there is a “growing epidemic of mortgage fraud” in the United States, with reported losses from such fraud soaring to more than $1 billion in the fiscal year 2005, up from $429 million in 2004. Impelled by concerns about issues including mortgage fraud and predatory lending, a number of states are introducing legislation to create or expand regulation for mortgage brokers.
“We believe that only criminal prosecution of mortgage fraud will deter unscrupulous operators in the marketplace,” Bev Andre, chair of the Real Estate Council of Alberta, told CanWest, “and that only through prosecution can those who commit fraud be made to bear its costs.”
Ron Esch, executive vice-president of the Calgary Real Estate Board, calls mortgage fraud a “huge problem because it does involve a lot of money, ill-gotten gains,” CanWest reported.
“It’s relatively easy to commit mortgage fraud,” said Esch, according to reports. “Obviously you’re doing a criminal act but it’s a criminal act not that difficult to do.”
The growing concern over mortgage fraud comes at a time when the province’s housing market is exploding, reports said. Last year, there were record sales in the Calgary area of 31,495 units and the overall dollar volume topped $8.5 billion, media reports said.
As of the end of February, the average selling price of a single-family home was $342,000 while the average price of a residential combined home (single-family, condo and mobile) hit $304,000, reports said.
There are two types of mortgage fraud: the first is when individuals fabricate their qualifications for a mortgage when buying a house. The second is fraud for profit, in which someone intentionally defrauds a lender or a homeowner of their interest in a property.
The latter is often accomplished by identity theft. Ownership of a property is transferred fraudulently from the rightful owner to the criminal who then sells or mortgages that interest and makes off with the funds.
The problem is becoming more prevalent as technology makes it easier to falsify documents and create identities, experts say.
“It’s huge,” Detective Robbie Robertson of the commercial crime unit with the Calgary Police Service, told CanWest. “I’ve been aware of it for over three years. There’s a huge, huge effect of this.”
Following a six-month investigation last fall, the police commercial crime unit in conjunction with Alberta Government Services charged Lloyd Lewis Mason, 33, of Calgary, with one count of fraud and one count of fraud in relation to making a false registration of title, accounts said.
The case involved the unlawful transfer of a title to a property to another person without the knowledge of the true owner, according to accounts. That person then took out an almost $110,000 mortgage on the property, accounts said.
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