Straw Buyer Fraud: What is it?
| March 17, 2016
At its most basic, a straw buyer fraud is someone a fraudster pays to make a fraudulent mortgage application on a property. The straw buyer usually isn’t a hardened criminal looking to scam anyone. More often than not, the straw buyer is someone in desperate need of cash, and the fraudster approaches them with a way to make easy money. They may even think there is no real harm. But what they are doing is a crime, and there could be severe consequences. Usually, the only one who benefits in this scam is the fraudster.
If someone offers you money to use your name and credit information to obtain a mortgage, contact the police and RECA.
Who is involved?
- fraud mastermind
- straw buyer—someone who agrees to put their name on a mortgage application on behalf of the mastermind—typically for a cash payment.
- lawyer in on the scam
- a property seller
- a lender
- fraud mastermind gets cash and the property title
- lawyer in on the scam gets a payoff from the mastermind
- straw buyer gets a cash payoff from the mastermind
Who is the victim?
- seller may not get as much as they could have for their property
- lender lends more money than was actually paid for the property
- straw buyer is left on the hook for mortgage payments
How does it work?
How can I protect myself?
Do not accept money from someone for use of your name and credit information. It’s as simple as that.
Straw Buyer Fraud in Alberta
In 2010, the Bank of Montreal sued hundreds of people in Alberta, including four of its own employees in a large straw buyer mortgage fraud scheme, which generated at least $140 million. Since then, lenders and industry professionals have put more robust policies and procedures in place to detect and prevent straw buyer fraud.