Ajax Pickering Real Estate Blog

Law society investigating 140 lawyers for illegal involvement

By James Bradshaw - Globe and Mail

Nearly one year after Ontario introduced new legislation designed to curb mortgage fraud, the problem remains acute as the province’s housing market continues to surge.

As of last Wednesday, the Law Society of Upper Canada was investigating 140 Ontario lawyers for their involvement in mortgage fraud.

This represents 22% of all lawyers currently under investigation, and is almost double the 72 cited in their 2005 mortgage fraud report. The Law Society mortgage fraud investigation team’s annual budget, which was $1.5-million in 2004, has ballooned to more than $3-million.

While the Law Society says only about half of investigations lead to disciplinary action, the number of lawyers involved remains high.

The Law Society disciplined two lawyers in the past month for their roles in mortgage fraud, and last Friday Toronto police arrested Toronto lawyer David Molson, alleging $2-million in frauds committed between November of 2002 and July of 2006.

Lawyers and lenders alike blame increasingly impersonal mortgage transactions and industry competition that cause due diligence to fall by the wayside as mortgage lenders try to gain an edge by expediting the process. But fraud expert Chris Mathers, a consultant and investigator with 20 years experience at the RCMP, said this explanation is inadequate.

“I think that’s a bit of a cop-out,” he said. “I think that people are saying that because they’re so busy to make a buck that they’re cutting corners, but I would agree that the use of financial intermediaries, specifically mortgage brokers, has muddied the water a little bit.”

One key vulnerability in mortgage fraud securitylies in the fraudulent use of Ontario’s Teranet, the world’s first online-only land registry. The Law Society report cites concerns about lost or stolen access disks used to alter land titles, but Teranet spokeswoman Bonnie Foster denied that a single documented case exists.

“To our knowledge, there has never been a fraud perpetuated through the improper use of a disk,” Ms. Foster said. “Certainly we know that there are some dishonest people out there, as there have always been, there are some lawyers that are being investigated by the Law Society, who indeed are qualified and registered users of ours, who may have used the system to perpetuate fraud, but the bottom line is they were authorized to do that.”

Ms. Foster added that transactions leave digital signatures that allow them to trace users, and therefore flaws in security fall outside Teranet’s control.

“The key is that in the land registration system it takes many pieces and many players along the chain to make things work,” she said.

The Ontario government enacted legislation in December of 2006 designed to protect homeowners victimized by mortgage fraud and to stiffen penalties for offenders, raising the maximum fine from $1,000 to $50,000.

Bill 152 preceded a February Ontario Court of Appeal reversal of its own earlier stand in a ruling that owners who lost their homes through these frauds would not be responsible for the resulting mortgages, shifting the burden to lenders.

Mr. Mathers said the legislation provides much-needed protection to homeowners, but does not influence fraudsters.

“Criminals don’t care about that, that’s hardly a deterrent. The average mortgage fraud nets about $300,000 … they’re not thinking about what the penalty is,” he said. “They know this is Canada, they’re not going to jail, and if they are, it won’t be for very long.”

Mr. Mathers did say that in the past 16 months, financial institutions are paying more attention to the problem.

“Especially over the past year they are doing considerably more due diligence than they used to do … there’s no replacement for good old due diligence,” he said, adding that accepting easily copied drivers’ licences as identification is another flaw in the process.

There appears to be no single measure of the scope of mortgage fraud in Canada or the losses incurred by lenders.

Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals, said that rising property values have masked some of the industry’s losses.

“It is hard, there is no central number on it,” he said. “Obviously fraud continues to be an issue, across the country but particularly in the major market places.”

In 2001, the conservative estimate for industry losses incurred as a result of mortgage fraud soared to $300-million, quadruple the 2000 exposure of $75-million.

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There are two main varieties of mortgage fraud:

Identity fraud
The fraudster transfers a property’s title to another name in the online land registry and discharges the old mortgage. The fraudster obtains a new mortgage using forged identification, banks those funds, and when the mortgage goes unpaid, the confused original homeowner receives payment requests addressed to the fraudulent owner.

Value fraud
In the more common variety, the fraudster has an accomplice purchase a property, then has a lawyer inflate the property value on the deed, and finally has a second accomplice arrange to purchase it at that price. They obtain a high-ratio mortgage on the inflated price and use some of the funds to finance the original purchase. They bank the remaining funds and stop paying the new mortgage. The lender can recover only the real value of the property.

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Contact the Jeffrey Team for more information - 416-388-1960

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In case of commercial mortgage, the customers are often unaware of the interest rate mortgage broker goes by. One should always consult a motgage amortization table before giving in to the temptation of the best remortgages. This is because usually mortgage rates are not that affordable and hence result in a second mortgage and then a third ad so on the list continues. Incase of home mortgage however the story differs.

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What many prospective borrowers don’t realize is that the pricing of mortgages and other loans is based in part on their credit-worthiness.  Consumers need to be aware of how their credit is evaluated by lenders, and how they can work to avoid so-called “bruised credit” – people with a lower credit score can find themselves paying a higher interest rate, or even denied access to certain types of loans.

A credit report is a detailed history of how consistently you meet your financial obligations, and provides a picture of your financial health based on your past behaviour.  A credit score is a three-digit number, usually between 300 and 900, representing your overall credit-worthiness, based on personal information from your credit report and other sources.

Both your credit report and score are important.  When deciding whether or not to grant a mortgage loan, lenders refer to an applicant’s credit report and score, along with a range of other factors such as income, employment history, and size of down payment.

The higher your score the more likely you are to be approved for a mortgage and receive favourable rates because the lender considers you to be a better credit risk.  Several factors are used by the two credit agencies in Canada (Equifax Canada and TransUnion Canada) to calculate credit scores:

* Debt payment history.
* Amounts owed compared to your current credit limits with lenders.
* How often you seek new credit.
* Length of time you have had credit accounts.
* Type of credit, such as car loans, lines of credit, credit cards.

About Invis
Invis is Canada’s largest mortgage brokerage firm with a national team of over 750 mortgage consultants. Invis Mortgage Consultants provide unbiased financial analysis, mortgage sourcing and mortgage advice for both first time homebuyers and repeat buyers.  Invis arranged more than $6 billion in mortgages in 2006.

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Contact the Jeffrey Team for more information - 416-388-1960

With so many new mortgage features being introduced in the Canadian marketplace, the choices for the consumer are immense. Perhaps the most anxiety-ridden part of house hunting is figuring out how much you can afford. Your real estate agent or a specialized Mortgage Consultant offers the expert, impartial mortgage advice you need, and can educate you on the range of mortgage types which are now available.

The formula used to be simple. For decades, the thinking was that your monthly mortgage payment, including taxes and insurance, should not exceed 28% of your gross pay, and that all your loans, mortgage included, should not exceed 36%. Lenders used that formula to qualify people for loans, and people relied on lenders to tell them what they could afford.

Today, lenders rarely use this cookie-cutter method. Some focus more on how much of a person’s monthly income goes toward paying off debt. Some do not use ratios at all. But whatever method lenders use, borrowers should play it safe and stick to the old formula, even if it means scaling back expectations.

You may need to start with a condominium or a small house, look at your purchase as the first investment, and then move up. Do not assume that because a lender is willing to loan you a certain amount of money, you should take all of it. Instead, assess your financial situation, make a budget and decide how much you can afford to sink into a mortgage each month.

Start by figuring out how much you now pay for housing. Do you have to pay the same amount on a home loan? Can you afford to pay more? If so, how much?

Below is some of the Mortgage options currently available in the Canadian Market:

Fixed Rate vs. Variable Rate Mortgages
With a fixed rate mortgage, the interest rate stays the same throughout the term of the loan, providing a measure of stability that some prefer. A variable rate mortgage can allow the borrower to take advantage of low rates as it typically has an interest rate that is calculated on an ongoing basis at the Bank of Canada prime lending rate minus a set percentage.

An Open or Closed Mortgage?
Open mortgages allow the borrower to pre-pay, renew or refinance at any time before maturity without penalties. A “closed” mortgage, on the other hand, usually allows for a set percentage of the principal to be prepaid without penalty. A “closed” mortgage may also be renegotiated or refinanced in most cases with the payment of a penalty which varies from lender to lender.

High-Ratio Mortgages
While a conventional mortgage is a loan for up to 80% of the purchase price of a property, a high-ratio mortgage allows you to borrow up to 95–100% of the purchase price. This type of mortgage must be insured.

The above-mentioned options are just a starting point – there are numerous other mortgage features to be explored, a specialized Mortgage Consultant will work with you to determine which mortgage best meets your individual needs and objectives.

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Contact the Jeffrey Team for more information - 416-388-1960

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For any bank home loan 2nd mortgage is quite a popular option. However, the mortgage calculators reveal that the deals that claim to be the best remortgages are never trustworthy, leading to piling up debts. The mortgage brokers reveal that most of the mortgage leads generated are the ones going for 2nd mortgage and hence return back due to reliable service earlier.

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