Any informed borrower is simply less vulnerable to fraud.
Source: My Funds2Go
Publish: @Fund2Go – Bank | Private Mortgages & Loans
Do you believe a straw borrower is committing mortgage fraud if they are purchasing the home and taking out the mortgage for a friend or family member who is not going to use the home to commit a crime?
Everything You Need to Know About Straw Buyers and Straw Mortgages
Fraud! If you lend money on mortgages that is a very scary word. With a client who simply can’t make their mortgage payment and defaults, at least you have some remedies to pursue your money. However, when a fraud takes place, depending on the type of fraud, your borrower may not be real at all.
In the spirit of Fraud Awareness Month we dedicate this blog to fraud involving straw mortgages. Knowing how to identify one is your first step to gaining the awareness needed to prevent this type of fraud.
A straw buyer is someone who is making a purchase on behalf of another person. This generally occurs because the person who wanted to buy the home could not qualify for the financing even with a co-signer. Is it illegal to take out a mortgage for someone else, no? Straw buyers are sometimes used to hide crime and a straw buyer may be paid on behalf of a criminal and paid to take out the mortgage because the purpose of the purchase may be to launder money or purchase goods for someone who cannot legally make the purchase on their own.
Straw buyers are often used by criminals in large purchase transactions. The real buyer will always promise to make the payments – but what happens if they don’t?
‘Straw buyer’ seduced into mortgage scheme
One Calgary man found out the hard way. As reported by the CBC, he is amongst hundreds of other Albertans being sued by the Bank of Montreal in an alleged mortgage fraud scheme. The mortgage fraud amounted to a total of almost $30 million according to the CBC article and many of the straw buyers were new immigrants to Canada who were compensated up to $8000 per deal to allow their name to be used in the alleged fraud transactions
Sussing out a straw borrower means asking more questions and strengthening the nature of your interviews. The first step: ask on application submission if the client is purchasing the home for themselves – and ask the same question a couple of times different ways.
Remember that a straw borrower will be the one who ends up holding the bag for the mortgage – and reminding someone of this can sometimes have a major impact. A declaration is a great way to freak out a straw borrower. Have the borrower sign a mortgage declaration that includes declaring that the purchase is for them and that includes the consequences associated to mortgage fraud/straw mortgages.
Knowing what to look for can significantly reduce the chances of getting stuck with a straw buyer – as can a few simple unassuming questions.
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Beware of unusual offers. Never lend your identity to anyone or sign documents you do not fully understand. “If it sounds too good to be true, then it probably is,”.
For more about the danger of straw buyers and straw mortgages, as well as other types of mortgage frauds, please contact Hannif Highclass today at 416.444.4252
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