Calgary, Alberta –the Real Estate Council of Alberta (RECA) is warning consumers who are private lenders about recent fraudulent activity. Private lending includes the business of providing a loan to someone using real property as the loan collateral.
RECA is currently investigating instances where private entities and related businesses have presented fraudulent and/or altered documents to secure mortgages from private lenders.
In the cases under investigation, private lenders have been approached by an unlicensed third-party who then connects them to borrowers looking for a private loan. The private lender is presented with altered and/or incomplete Land Title Certificates that list the borrowers incorrectly as the property owners and no encumbrances or liens on the property title. The third-party assures the private lender their mortgage will appear in second position on title to protect them in the event the borrower defaults on the mortgage.
In fact, RECA has found that there were numerous caveats and liens on the property used for collateral and the borrower, in some cases, was not the owner, leaving the private lender in jeopardy of their loan being unsecured.
Consumers who lend private funds, with property used as collateral, are urged to use a licensed mortgage brokerage and licensee to connect them with a borrower. Licensing protects you as a consumer and as a private lender. Licensing ensures individuals have the necessary education to competently provide services to the public and are accountable to high standards of practice. Dealing in private mortgages is considered a specialized area of mortgage brokering. Not only should you use a licensed brokerage and individual, but it is also advised to request references from the licensee’s private lender clients.
All licensees must carry errors and omissions insurance, and consumers who use a licensee are further protected through the Consumer Protection Fund in case of fraud or breach of trust.
Further, RECA suggests any private lenders use their own due diligence and directly obtain any Land Title Certificates for property used as collateral themselves to ensure authenticity.
RECA urges consumers and licensees to verify the licence status of brokerages and individuals on RECA’s website by following these steps:
If you have concerns regarding a private lending situation, please contact firstname.lastname@example.org.