The Law Society of Newfoundland & Labrador

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Mortgage Fraud - Red Flags

MORTGAGE FRAUD – RED FLAGS
• The mortgage advance exceeds the balance due on closing.
• Credits which are not referenced in the purchase agreement or in amendments to the purchase agreement are granted to the purchaser for purported reasons including the following:
-additional deposit
-gift
-promissory note
-renovations and repairs
-vendor take-back mortgage
-rebate for real estate commission
• The mortgage advance exceeds the balance due on closing.
• 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 percent 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 including instructions, directions, client identification and information coming from a third party, or alternatively, 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.