Mortgage Fraud: Protect Yourself

Mortgage fraud is a crime. If you are approached about making quick, easy money in real estate, are asked to use your name for credit purposes, or are asked to create or alter certain documents in a real estate or mortgage transaction—be suspicious, all of these could be signs of mortgage fraud. If you suspect you may be getting involved in a fraudulent transaction, report your suspicions to the Real Estate Council of Alberta (RECA).

Do you know the signs of mortgage fraud? Do you know how to avoid becoming involved in a fraudulent transaction? Review the list of mortgage fraud red flags learn to protect yourself.

Mortgage Fraud Red Flags

  • someone offers you money to use your name and credit information to obtain a mortgage
  • you are encouraged to include false information on a loan application
  • you are asked to leave signature lines or other important areas on a loan application blank
  • the loan amount on the mortgage is significantly higher than the value of the property
  • the mortgage has been refinanced several times and in each instance, the amount of the mortgage has increased
  • a seller or investment adviser discourages you from seeing or inspecting the property you are buying

Red flags may indicate, but don’t guarantee, there’s a fraudulent transaction taking place; however, they should raise suspicion.

If it sounds too good to be true, it probably is. Mortgage fraud is not a way to get-rich-quick—it’s an illegal transaction. Getting involved in mortgage fraud can damage your current and future employment prospects, and your credit rating, and could lead to criminal charges.


Mortgage fraud isn’t a single situation with a single type of transaction. Mortgage fraud occurs in a variety of ways, for a variety of purposes.

Foreclosure Fraud: This type of mortgage fraud often targets vulnerable, individuals with low or no income whose homes are in foreclosure, or who are at risk of defaulting on their mortgage. Foreclosure fraud situations can include:

  • a fraudster approaching a homeowner in financial trouble with a debt-consolidation deal that typically involves the owner paying upfront fees and transferring the home’s title to the fraudster
  • a homeowner receiving cash from the fraudster to address immediate bills and remains in the home paying “rent” or “consolidated debt payments” to the fraudster
  • a fraudster pocketing all of the homeowner’s payments while ignoring bills and taxes, leading to debt-collection procedures against the owner
  • a fraudster re-mortgaging or selling the property to an accomplice, leaving the owner homeless, without the property title, and still in debt

Fraud for Profit: Fraud for profit typically involves a number of individuals, often involving a straw buyer—a person who makes a purchase on behalf of another person—who work together to artificially inflate the price of a home or get mortgage funds for non-existent homes. A typical scheme involving a straw buyer would involve

  • the straw buyer, for some of the profit, lending their identity and good credit to the fraud
  • the “real” buyer—the fraudster—purchases the property using the straw buyer’s identity and credit, with the agreement of making all the mortgage, insurance and tax payments in addition to paying the straw buyer for the use of their credit
  • the fraudster then takes the money intended for the mortgage and doesn’t make the payments, leaving the straw buyer with the property and no means of paying the mortgage, which is often an artificially inflated amount
  • the straw buyer can be held legally responsible for the mortgage debt, possibly ending up in foreclosure and bankruptcy and with a bad credit rating

Fraud for Housing: It is mortgage fraud if you provide false or misleading information on a mortgage application so that you’ll qualify for a mortgage you wouldn’t otherwise qualify for. It’s also fraudulent if you say you’re going to be living in the property, in order to get the mortgage loan, but you have no intention of living in the home.

Fraud for Title: This type of mortgage fraud involves identity theft and can include:

  • a fraudster using your identity to change the title on a home you own—effectively stealing your home
  • the fraudster can also use documents based on your identity to take out a mortgage on a home you own, taking the money and leaving you with the debt because the mortgage was in your name

Seller Financing Fraud: When a sale involves seller financing (also called a vendor take-back mortgage), a seller may own their property outright (i.e. there is no mortgage). The seller agrees to sell the property to a buyer in exchange for a buyer’s monthly payments, including interest—as opposed to the full purchase price upfront. The seller registers a mortgage on the property to secure their interest in the property, much like a traditional lender would. “Rent to own” agreements may also be viewed as seller financing. Rental payments are made to a seller and over time the buyer may own the property. These agreements may also be registered on title. Seller financing fraud happens when a buyer is led to believe they have entered into a legitimate real estate purchase contract with a seller when they have not.



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Are there different types of mortgage fraud?

Yes, there are a few different kinds of mortgage fraud. The main types to be aware of are fraud for housing, fraud for title, fraud for profit, and foreclosure fraud. For details on the different kinds of fraud, see Mortgage Fraud Awareness and Prevention.

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What is fraud for housing?

Fraud for housing is providing misleading or false information on a loan application (usually by misrepresenting income or other debts) to qualify for a mortgage loan you would not otherwise get and/ or representing on the loan application you are going to live in the home, when in fact, you have no intention to live in the home.

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What is fraud for profit?

Fraud for profit is fraud where the motive is financial gain. This usually includes a number of individuals working together to inflate the price of a home or get loans for non-existent homes. Organized crime is often the mastermind of these fraud schemes. Industry insiders are normally involved, and the fraud is more complex. Check out an example of a typical Straw Buyer mortgage fraud for profit.

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How can I protect myself from mortgage fraud?

  • review RECA’s Mortgage Fraud: Protect Yourself poster
  • watch out for people who make you an offer that seems too good to be true
  • read any contracts you sign very closely - when in doubt, have your lawyer review documents and contracts if something doesn’t seem right to you
  • check your land title every so often to ensure there is nothing suspicious showing up on title (second mortgage, etc.)
  • check your credit through Equifax or Transunion every couple of years to make sure you haven’t been the victim of identity theft

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Some mortgage fraud is more serious than others, right?

Unfortunately, this isn't true. Fraud is fraud. Just because it was for housing rather than for profit does not make it any less serious. The fact is, it’s a fraudulent action. Law enforcement bodies and other regulators take fraud seriously.

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What should I do if I suspect a suspicious real estate or mortgage transaction?

Your best bet is to speak to a lawyer about your suspicions.

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Can individuals who are involved in mortgage fraud be punished by law?

Yes. Fraud is a Criminal Code of Canada offence.

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Where can I go to learn more about how to protect myself from mortgage fraud?

The Real Estate Council of Alberta is one resource for consumers about mortgage fraud prevention and awareness, but there are others:

  • Service Alberta
  • CMHC
  • The Law Society of Alberta
  • Mortgage Professionals Canada

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What is a “straw buyer”?

“Straw buyers” are phony loan applicants. A fraudster usually offers a straw buyer payment in exchange for the use of their name and credit information. Straw buyers may say they did not know their name would be used on a mortgage application, but saying you didn’t know your information would be used to commit mortgage fraud is not a legitimate excuse under the law. Straw buyers may also be used to sign documents containing false information. Learn more about straw buyers.

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Am I only at risk for mortgage fraud if I have bad credit?

No. Mortgage fraud can affect anybody; good or bad credit, employed or unemployed. Some mortgage scam artists try to recruit buyers with good credit who might be attracted to quick, high return investment opportunities.

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Can I be compensated if I become the victim or mortgage fraud?

RECA administers the Real Estate Assurance Fund in Alberta (also known as the Consumer Protection Fund). The Fund compensates consumers who suffer a financial loss as a result of fraud, breach of trust, or a failure to disburse or account for money held in trust by an industry member with respect to a trade in real estate or deal in mortgages. The protection does not extend to clients of unlicensed professionals.

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How do I find out if the person I am dealing with is a licensed real estate or mortgage brokerage professional?

All professionals who are licensed to trade in real estate or deal in mortgages in Alberta can be found through a quick online search at www.reca.ca. Go to our Find a Professional tool and type in the name of an individual or a company.