Mortgage Fraud – Red Flags
Lawyers must always be diligent in preventing mortgage fraud. If any of the following red flags are present in a real estate transaction, think twice:
- The mortgage advance exceeds the balance due on closing.
- Credits which are not noted in the purchase agreement or in amendments to the purchase agreement are granted to the purchaser:
- as an additional deposit,
- as a gift,
- under a promissory note,
- for renovations and repairs,
- as a vendor take-back mortgage, or
- as a rebate for a real estate commission.
- Credits are granted to the purchaser in an amendment to the purchase agreement that have not clearly been disclosed to the lender.
- The purchase price of the property has escalated substantially over a relatively short period of time.
- The lender is effectively advancing more than 95% of the purchase price where the mortgage is insured.
- The purchaser provides no or minimal funds on closing such that only the mortgage advance is required to complete or substantially complete the purchase.
- Closing funds come in the form of a cheque or bank draft drawn from a source that indicates that the source may not be the purchaser.
- The purchase agreement (and any amendments to the agreement) indicate that the deposit is payable directly to the vendor rather than to the vendor’s real estate broker or lawyer.
- There is third-party involvement, for example, instructions or directions given by a third party, client identification and information coming from a third party or directions to report to or pay excess mortgage proceeds to a third party.
- The same purchasers, vendors, real estate agency or mortgage broker are present in multiple transactions.
- The lawyer is asked to make a last-minute registration under a power of attorney.
- The lawyer is asked to complete a transaction in a short period of time.
- The lawyer is offered higher than usual legal fees for acting on the transaction.
Real Estate Transactions
Procedure for Real Estate Transactions
Payment of Disbursements and Expenses
Commissions and Discounts
Final Reports on Title
Anti-Money Laundering and Terrorist Financing Guidance for Lawyers
Risk Advisories for the Legal Profession
Risk Assessment Case Studies for the Legal Profession
(Posted: June 12, 2020)