New federal laws and regulations in Canada dealing with money laundering and anti-terrorist financing that go into effect today require real estate agents and brokers to collect and verify more personal information from buyers and sellers. Canada’s real estate agents must also now track the source of funds received during the course of a real estate transaction, such as the deposit.

These new regulations are part of federal legislation (Bill C-25) passed in 2007 that requires a number of industries, including real estate, to do more to help stop money laundering and terrorist financing. The regulations are enforced by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

“Real estate agents have had legal obligations under the federal government’s push to prevent criminal activity and terrorism since 2001, when Canada’s first comprehensive laws to combat money laundering and terrorist financing were introduced,” says the President of The Canadian Real Estate Association, Calvin Lindberg. He is a REALTOR® in Vancouver.

“In the first phase of compliance, real estate agents were required to report only suspicious transactions, or transactions involving more than $10,000 in cash,” the CREA President explains. “Now, verified personal information must be kept of the buyer and seller for each and every real estate transaction in Canada. That personal information includes details such as occupation.”

Real estate agents are now required to ask for proof of the identity of all buyers or sellers involved in a Canadian real estate transaction. If the client is a corporation, that information must include corporate documentation, and the names of the corporation directors. They must also ascertain if a third party is involved in the transaction.

This also applies if a buyer or seller involved in a transaction is not represented by a real estate agent, but the other individual involved is represented. Those buying or selling privately will be asked by the agent representing the other party involved in the transaction to provide proof of identity as well, andmust be kept by the real estate agent involved in the transaction.

Also under the new FINTRAC regulations, Canada’s real estate agents dealing with clients they never meet must also verify personal information. The broker office involved can do this with a service agreement with an agent in the area where the client is located. That agent must then meet the client, verify their identification, and provide the information to the broker office handling the real estate transaction.

In addition to verification of personal information, real estate agents must also now complete a report on the receipt of all funds received during the real estate transaction.

In order to comply with these new regulations, Canada’s real estate agents are required to keep the identification and receipt of funds information on file for five years and provide it to FINTRAC whenever requested.

25 Indicted in Chicago mortgage fraud scheme: Federal authorities have charged 25 people in what is considered one of the largest mortgage fraud schemes in Chicago area history. Following a four-year investigation, the FBI and U.S. Attorney’s office alleged in three indictments that more than 150 homes were involved in fraudulent mortgage transactions worth $25 million.

Colorado real estate agents get lesson in fraud: Summit County, Colorado, real estate agents got a lesson in identity theft prevention this week at a workshop detailing a nationwide problem quickly seeping into the industry. Janet Elkins, a fraud specialist at Alpine Bank, gave a quick tutorial on how individuals can prevent against identity theft, as well as how business can make smarter choices to prevent thieves from getting their foot in the door.

Ogden, Utah, businessman charged with real-estate fraud: The Utah Attorney General’s Office has filed criminal charges against an Ogden businessman accused of bilking hundreds of investors out of more than $140 million. Val Edmund Southwick, 62, was charged in Salt Lake City’s 3rd District Court today with nine counts of securities fraud, a second-degree felony. Prosecutors accuse him of bilking 817 investors out of millions in a commercial real-estate investment scheme. The federal Securities and Exchange Commission filed a separate civil action against Southwick over his Ogden-based business, VesCor Capital, which it alleges was a “massive Ponzi scheme.”

State cracks down on mortgage brokers: Colorado regulators Friday announced their first actions against mortgage brokers under a new set of state laws aimed at curbing unscrupulous lending practices. In one case, the state’s Division of Real Estate issued a cease-and-desist order against Cade Emerson Lee, who it accused of acting as an unregistered mortgage broker in Colorado despite having been convicted of felony securities fraud.

Mortgage fraud spiraling out of control in London, England: “Endemic” mortgage fraud on new homes has triggered a wave of repossessions and forced a widespread crackdown by regulatory authorities. Initiatives to address lenders’ concerns that residential mortgage fraud is on the rise are either under way or will be launched by the Council of Mortgage Lenders, Financial Services Authority–the City watchdog–the Royal Institution of Chartered Surveyors and police forces around the country.

Michigan tax accountant sentenced in $21 million mortgage fraud case: A Dearborn Heights, Michigan, tax accountant, convicted of stealing $21 million in a mortgage fraud scheme, was sentenced in federal court Thursday to five years in prison. U.S. District Judge David Lawson sentenced tax accountant Kalil Khalil, 36, to 60 months in prison for wire fraud based on a two-and-a-half-year scheme to defraud mortgage lenders.

Kingpin of $30M mortgage fraud scam in Canada jailed: The kingpin of a $30-million mortgage fraud believed to be the largest in Alberta (Canada) history was sentenced Thursday to six years in prison. Gohar (Carmen) Ahmed Pervez, 45, pleaded guilty to 54 counts of fraud that netted him more than $1.8 million in profit in less than five years. He received two-for-one credit for the two years he has served in the remand centre and is now slated to spend two more years behind bars.

Texas couple indicted for $3 million real estate fraud: A Navarro County, Texas, grand jury handed down indictments against three individuals Thursday, in connection with what prosecutors are calling “an organized mortgage fraud scheme.” Lynn Marriott, 54, and Kandace Y. Marriott, 51, both of Gun Barrel City, along with Karen Hayes, 56, of Kemp, were indicted for the first degree felony. Cpl. Mark Nanny of the Corsicana Police Department uncovered the operation, subsequently bringing in the Housing and Urban Development department (HUD) to the investigation. The defendants were doing business as One Way Home & Land, dealing with manufactured housing. Prosecutors allege the company falsified residential loan applications in order to assure the buyers’ loans were approved by mortgage lenders.

Mortgage Fraud Surging in Florida: More potential mortgage fraud cases were reported by lenders in Florida in 2007 than in the entire country the previous year, William Stern, a supervisory special agent with the FBI, said today. And Tampa, he said, ranks seventh on the agency’s top 10 list for mortgage fraud, joining another Florida city on the list, Miami, which is No. 4.

Several face charges in Canadian real estate fraud probe, including…: Ready for this one? Hold onto your hat… A 70-year-old Canadian man is among five people charged and police are looking for others in connection with a massive real estate fraud totalling nearly $4 million. Toronto, Canada police laid 135 fraud-related charges this against five people, and Canada-wide warrants have been issued for two more suspects.

Las Vegas escrow officer arrested for mortgage fraud: Sheila Katherine Williams (pictured below), a Las Vegas, Nevada escrow officer, was arrested after fraud investigators say she pocketed more than $500,000 in escrow funds. Authorities say this case is just the tip of the iceberg in what they believe will be a deluge of mortgage fraud cases in the weeks and months ahead, and that this particular arrest is another ripple effect of Nevada’s worsening foreclosure crisis.

Gary, Indiana attorney sentenced for real estate fraud: According to the AP, Gary attorney Willie Harris has been sentenced to four-and-a-half years in prison for his role in a real estate fraud scheme. Harris was convicted in September on fraud and tax evasion charges for skimming $50,000 from the profits of a 2000 real estate deal involving a now-defunct local enterprise association. The Indiana Supreme Court suspended Harris’ law license earlier this month.

Woman receives $3.5 million judgment in mortgage scam case: A Great Neck, New York woman victimized by mortgage fraud when she unknowingly gave away her house has won a $3.5 million judgment against the mortgage broker who scammed her. Priscila Nano, 66, said she was “scared” and on the brink of losing her longtime home to foreclosure in 2004 when she received an advertisement from a company called Foreclosure Options Inc., and called the company’s number. In court papers, Nano’s attorneys described her as “an underemployed, senior citizen and immigrant with a modest command of the English language … desperate to keep her home.”

Maryland expects significant rise in mortgage and foreclosure scams: A dramatic rise in foreclosures and related scams is expected in Maryland in the coming year, prompting that state’s governor and the General Assembly to roll out several initiatives intended to help people keep their homes and avoid mortgage fraud. Governor Martin O’Malley this week proposed a set of emergency regulatory reforms and bills to target predatory lending and mortgage fraud, more efficiently inform homeowners about foreclosures, and create stricter licensing regulations. In addition, there are at least five more foreclosure-related bills that have originated in the state’s legislature this year. Maryland had 6,969 foreclosures in October and November 2007 alone.

16 People Indicted in Austin, Texas Mortgage Fraud Scheme: The United States Attorney for the Western District of Texas announced that a federal grand jury has returned an indictment charging sixteen individuals for their roles in a multi-million dollar mortgage fraud scheme.

• Nightmare on Highbury Court: A dispute over bricks led to bankruptcy, eviction, jail and fractured lives; first of two parts. Life was good for Roland and Marie Dreilich in the summer of 1999. In their mid-30s at the time, they’d already purchased two homes, taking advantage of the booming real estate market of the 1990s to acquire equity and move up the housing ladder.
• Real estate lawyers asleep at the fee switch: Most puzzlingly of all, is the fact that real estate fraud is actually less prevalent today, than it was when Bill 152 was a glint in the McGinty government’s eyes. Over the past two years, lawyers and title insurers have put into place far more stringent controls and fraud has declined accordingly.
• Mortgage meltdown linked to fraud: The desire to make a “quick buck,” along with extremely lax lending practices, are considered to be among the chief reasons for the recent decline in the nationwide mortgage and housing markets, according to a Utah title company executive.
• Grandview man gets one year for mortgage fraud: The second of three defendants in the mortgage fraud scheme involving former Kansas City Councilwoman Saundra McFadden-Weaver was sentenced Thursday to one year in federal prison. Ricky Hamilton, 53, of Grandview, also was ordered by U.S. Chief District Judge Fernando Gaitan of the Western District of Missouri to pay $144,234 in restitution.
• Stock Market & Stocks: Fraud a Major Concern as Economy Worsens: The people who pay the price for Wall Street abuse need to know what to do if they have been victims of Wall Street or mortgage fraud and abuse, what to do to protect themselves so they can live now, sustain and grow for a secure future, and other steps they can take to best prepare for what we believe is the inevitable recession.
• FBI Launches Mortgage Fraud Task Force in the Nation’s Capital: The FBI is launching a mortgage fraud task force in its Washington field office, joining a widening net of state and local investigators digging into the market crisis. Investigators are seeking to uncover evidence of overvalued home appraisals, shoddy lending practices and alleged irregularities in the packaging and sale of groups of loans that were marketed to ordinary investors, state investment funds and big Wall Street banks.
• Foreclosure Fraud: Freddie Mac Warns Borrowers with Video Dramatization on ‘YouTube’: Can a custom made video posted to YouTube keep troubled borrowers from losing their homes to fraud artists? Freddie Mac aims to find out. One of the nation’s largest investors in residential mortgages, Freddie Mac decided to produce an Internet video dramatizing a common foreclosure fraud scheme after a new survey found one in four delinquent borrowers go to the Internet before their bank or lender for information about avoiding foreclosure. Freddie Mac’s anti-fraud video can be found at http://www.youtube.com/AvoidFraud.
• Six face federal indictments in Provo, Utah mortgage fraud scheme: Six people have been indicted on federal charges for an alleged mortgage fraud scheme that inflated the value of high-end homes in an affluent Provo neighborhood. Prosecutors say the six formed a network of mortgage brokers, investors, real estate agents, appraisers, straw buyers and escrow agents to fraudulently obtain loans secured with property worth less than the loans.
• In Modesto (Calif.), Fraud Destroyed The American Dream For Many: The terms of the loans may have been unusual. But for many of the immigrants who signed up for them, they were simply a way to afford the $300,000 and $400,000 new homes along streets with names like Rancho Encantado and a litany of saints.
• Lousy credit? Buy somebody else’s: The Bush administration came up with one fix for some sub-prime borrowers who are in trouble. A San Diego company offers another: Buy a better credit score. With one or more of the “seasoned primary accounts” that TradeLine Solutions Inc. began selling this week, the company’s website says, you can “dramatically increase your credit score” for as little as $1,199.

In the never-ending saga of acts that lead to foreclosure and real estate and mortgage fraud, piggybacking off of someone else’s credit in order to raise the score of your own, has to be one of the most dangerous acts the wannabe homeowner can commit. I’ve said it before and I’ll say it again: these piggybacking schemes are another type of mortgage fraud.

Anyone who applies for a home loan using a piggybacked credit score is lying to the lender–claiming to have a better credit history than they really have. Sadly, because federal regulation doesn’t prohibit the practice, the lender is fooled into making a decision to approve a loan based on false information.

Be careful of companies like this.

Even though this company appears to be based out of Canada, there are plenty of similar boiler room operations here in the United States, and one of our responsibilities is to protect the American Dream, and one of those dreams is the American Dream of Homeownership. If we begin to turn the other way when people are committing obvious fraud, we place the entire system at risk. Homes will cost more money, loans will become even more less accessible, and someday our children and grandchildren will no longer be able to afford their own homes.

Credit enhancement companies who engage in this sort of activity claim that they are not breaking any laws. But no matter what they say, using trickery and schemes to beat the system will eventually catch up with all of us, and we will get stuck with the bill–somebody always does.

Borrowers need to earn credit scores that honestly reflect their ability to pay back a loan, not fraudulently manipulate authorized user credit card accounts.

1. Sorry for not mentioning this in my original post, but fortunately, Fair Isaac Corp. (the company that computes the most commonly used credit scores) is fighting back by announcing that its next version of the FICO score will no longer consider certain types of credit card accounts, closing a loophole that currently allows strangers to coattail on a cardholder’s good credit. See “Fair Isaac combats credit manipulation,” for more details.
2. Also, it’s interesting to note that I only found out about the company referenced above because they shot me an unsolicited email message touting their ability to “remove negative items from credit for a couple hundred bucks.” Had I never received their spam–which I’m sure was sent to millions of people–I never would have known about them. Regardless of how I heard about them, I find it absolutely ridiculous that they’ve chosen to copyright their website “2004 - 2007″ when a “whois” search reveals that the site itself is less than 30 days old.
3. Finally, if you’re interested in hearing me speak about the dangers associated with authorized user credit card accounts, listen to my interview with Nicole Hamilton, author of the popular blog “Just Ask Nicole” and President of Credit Hour, a Michigan-based credit education company that specializes in helping you “get smart about your credit.” Nicole teaches courses to consumers to help them improve their credit, and is well versed on the problems associated with people who use boosted credit scores to obtain home loans.

• Mortgage Fraud Law Goes into Effect in North Carolina: Among the list of new laws taking effect tomorrow in North Carolina–a law making it easier to prosecute residential mortgage fraud by defining the practice and creating tougher punishments for repeat offenders.
• Mortgage Inquiries Swamping Arizona: Arizona’s mortgage regulator has shut down a handful of firms for fraud and other illegal lending practices this year, but at least 40 other investigations are stalled because there is no money to fund them.
• California Real Estate Firm Investigated for Fraud: Federal investigators are looking into Crisp & Cole Real Estate’s operations for possible mortgage fraud after a federal raid of 13 of the now-defunct California company’s offices.
• New Jersey Lawyer-Judge at Center of Land-Flip Investigation: A NJ lawyer who is also his town’s judge may have played a central role in a scheme to defraud lenders by obtaining mortgages based on inflated appraisals of run-down properties.
• Minnesota Mortgage Firm is the Focus of Fraud Probe: Investigators are probing mortgage fraud complaints involving Universal Mortgage and several of its employees that are said to have used straw buyers to buy property at inflated prices.
• Guilty Plea Entered in Missouri Fraud Case: A 30-year-old man from St. Louis is the fifth person implicated in a mortgage fraud ring involving dozens of homes and millions of dollars in real estate transactions dating back to 2005. Daniel Mann pleaded guilty to conspiracy to commit wire fraud and now faces a maximum penalty of five years in prison. Mann admitted to arranging a number of fraudulent real estate transactions that were part of a larger fraud ring coordinated by another person who pleaded guilty in September to similar charges and will be sentenced in December.
• Canadian Paralegal Convicted in $30 Million Mortgage Fraud Scam: An Edmonton fraudster has been convicted of supporting a criminal organization by helping to swindle unsuspecting real estate investors out of nearly $30 million. Sixty-one-year-old Terry Ellis was found guilty of 12 counts of fraud and one count of forgery in connection with a massive mortgage fraud believed to be the biggest in Alberta history.
• Editorial Questions Michigan Attorney General’s Record on Real Estate Fraud: In the state hardest hit by real estate and mortgage fraud-related foreclosures, its attorney general, Mike Cox–who has won nationwide notoriety for locking up parents behind in their child support payments–has yet to file a single criminal complaint against any mortgage broker or lending entity.
• Two Sentenced in Connection with $15 Million Mortgage Fraud Case in Ohio: Two people have been sentenced to prison in connection with what prosecutors describe as a mortgage fraud scam in upscale Cleveland suburbs. Builder and developer, Edward Emery received a sentence totaling 34 months and a fine of $10,000. Eloise Anderson will spend nearly a year in prison and has been ordered to pay $35,000 in restitution.

As a part of Fraud Awareness Month, some Toronto, Ontario, homeowners will awaken this morning to find “Stolen/Not for Sale” signs planted in their front lawns. The Consumers Council of Canada, along with First Canadian Title, is staging the event to warn homeowners that Canada’s busy real estate season can be a breeding ground for real estate scams, often costing homeowners as much as $300,000 per case.

As most Flipping Frenzy readers know, real estate title fraud can take several forms, and it often starts with identity theft. A basic scam can be as simple as: a fraudster targets a house, forges a transfer deed using a stolen identity, registers in his or her own name, forges a discharge of the existing mortgage and borrows against the clear title.

While today’s event will take place in the Don Mills / Lawrence neighborhood, the Consumers Council of Canada and First Canadian Title conducted similar events last week in both Vancouver and Calgary. Over the past three years, First Canadian Title has embarked on a number of high-profile consumer campaigns and partnerships to raise awareness of the issue of title fraud. This includes participating in the Fraud Prevention Forum, a group of private and public sector firms, consumer and volunteer groups and law enforcement organizations whose mandate is to educate consumers and businesses on the effects of fraud across Canada.

Chalk one up for Canadian homeowners. According to CBC News, a recent court ruling that freed a husband and wife from a fraudulent mortgage is an unprecedented breakthrough. A Toronto judge ruled earlier this week that Seyed Rabi and his wife, Shohreh, were the innocent victims of identity thieves who placed a $250,000 mortgage on the couple’s property. Until Tuesday’s ruling, Canadian courts seemed unwilling to release homeowners from the obligations associated with falsified mortgages, fraudulent home sales, and even counterfeit powers of attorney that resulted in the unauthorized sale of a legitimate property owner’s home.

In Tuesday’s decision, the judge said that if the Toronto-Dominion Bank had exercised due diligence, it would have detected the scam that left Rabi and his wife without their home, reported CBC News. Luckily for the couple, the judge invalidated a fraudulent mortgage and said the bank was not an innocent victim of a crime. Although the bank admitted in court filings that Rabi and his wife were victims of fraud, lawyers argued that they were still legally responsible for the mortgage.

Regular readers may recall that I recently wrote about an elderly man in Canada who fell prey to a vicious real estate fraud scam. Eighty-nine year-old Toronto resident Paul Reviczky’s identity was stolen, and by using a falsified power of attorney, thieves were able to sell his property to an unsuspecting purchaser. As a result of Reviczky’s situation, and the outrage caused by the government’s inability to do anything about it because of existing laws, legislation will be introduced this fall that the government says will ensure that property owners do not lose their homes as a result of real estate fraud or become responsible for fraudulent mortgages.

If passed, the proposed legislation would ensure that ownership of a property couldn’t be lost as a result of the registration of a falsified mortgage, fraudulent sale or a counterfeit power of attorney. Instead, an innocent homeowner’s title would be restored and the fraudulent documents nullified.

The proposed legislation will also:

• Introduce new safeguards for suspending and revoking the accounts of fraudsters so that they cannot register documents, and…
• Raise existing fines for real estate fraud-related offences from $1,000.00 to $50,000.00.

While the Ontario government’s proposed legislation on real estate and mortgage fraud is a step forward for property owners, it only provides assistance after the fact and does very little to prevent real estate and mortgage fraud from occurring in the first place.

As part of the continuing change in business to employ more and more technology, many banks, including those in Canada, have turned to automated valuation applications. The upside is faster turn around on mortgage transactions, while the downside is that the automated process takes a key step out of the transaction–the personal contact that takes place by a third-party appraiser’s onsite valuation of the property in question.

Until government officials allocate funds for consumer education and personal interaction in each and every real estate transaction, the vast majority of legislative efforts are likely to fall short in curbing the bad guys’ appetite for fraud.

Reporters ask great questions, and Harold Levy from the Toronto Star is no exception:

1. How common in North America are fraudulent schemes where the fraudsters become tenants in order to perpetuate some form of title fraud?
2. What is your advice to landlords to avoid these situations?

Levy posed those questions to me last week because of a story he was working on for this past Saturday’s edition of the Toronto Star. Thieves, Levy told me, stole an 89-year-old Toronto man’s identity, and by using a falsified power of attorney were able to have a nonexistent grandson sell the man’s property to an unsuspecting purchaser. What happens next could be even more shocking… the man may lose his house forever because Ontario law recognizes the transaction as valid!

From the Toronto Star:

Paul Reviczky, who fled Hungary in 1957 to escape Communist persecution, is one of the latest homeowners to discover that Ontario law favours banks, mortgage companies and purchasers over victims of fraud….

Reviczky purchased the property at 220 Sheppard Ave. W. in 1980 for $67,500 to generate a rental income that would help pay for the education of relatives back in Hungary….

Since his wife’s death in February 2005, he has lived alone in his home a few kilometres from the rental property.

Reviczky could not believe his ears on June 26 when his neighbour, a real estate agent, told him she had noticed on the computer that he had sold his rental property in May.
“So I went back to my office, got the record from the computer and showed it to him,” Vivian Ho told the Toronto Star. “His face turned red and I was worried that he was going to have a heart attack.”

Police believe Reviczky’s most recent “tenants” forged his name on a power of attorney that purported to give a grandson named “Aaron Paul Reviczky” authority to sell the home on his behalf. “I don’t have a grandson named Aaron,” Reviczky says. “I don’t have any grandsons.”

Ralph Roberts, a Michigan-based expert on mortgage fraud, says inroads will not be made into burgeoning real property and mortgage fraud until more homeowners and legislators become aware it exists. “There is not enough of a public awareness,” he says. “People just keep getting dragged into it one after another.”

Click here for Levy’s entire story. What happened to Mr. Reviczky is sad but unfortunately not uncommon.

The Detroit News is reporting that a Grosse Ile, MI, man has filed a class-action lawsuit against 17 companies and individuals, alleging he was the victim of real estate fraud based on grossly inflated residential property appraisals. Blaise Repasky, who The Detroit News says filed suit last Friday in U.S. District Court in Detroit, alleges that he purchased eight Detroit area homes in 2004 at a total cost of $940,000 but later learned that the true value of the homes totaled just $393,150. Click here for The Detroit News article.

A Dallas, TX, television station is reporting that a local man stands accused of running a mortgage fraud scheme that involved a home once owned by a popular ex-Dallas Cowboy football player. According to Dallas’ CBS 11 News, Oltha Austin, Jr. is wanted on suspicion of committing mortgage fraud. Apparently, Austin forged his mother’s name on a loan application and falsely claimed that she had a trust fund worth an estimated $6,000,000. Click here for the entire story.

From HattiesburgAmerican.com: “Richard Lucas, the alleged ringleader in a mortgage fraud case, was jailed Friday afternoon on a federal court order. Lucas, 31, was booked into Forrest County Jail about 1:10 p.m. Friday and remained there today. He and nine other people face federal charges of bank fraud, wire fraud and conspiracy to commit bank and wire fraud in connection with a so-called mortgage flipping scheme. During a March 1 hearing, U.S. Magistrate Robert H. Walker ordered Lucas to report to Clearview Recovery Center for drug treatment as soon as a bed was available and to maintain communication with federal probation officers. He had ordered Lucas to undergo a drug assessment as part of a pre-trial release agreement. It was not clear today why Lucas was ordered jailed.”

From The Chicago Tribune: “Federal authorities said Friday that a banker who fled the country after being indicted for mortgage fraud arranged for the wire transfer of $800,000 to accounts he controlled in Switzerland and Dubai shortly before he was charged. Fugitive banker Michael Kakvand was arrested in December in Canada, returned to Chicago but now wants to be released on bail. His lawyer, Edward Genson, is arguing that he is not a flight risk. U.S. District Judge William Hibbler has scheduled further hearings on the issue. FBI agent Jay Hagstrom testified Friday that Kakvand was secretly and illegally tape-recorded by a one-time co-worker while he was on the run. In one recorded conversation, Kakvand tells the worker: “I am sure from the bottom of my heart I have not done something terribly wrong.” Prosecutors contend that Kakvand was part of a ring that engaged in a $29 million mortgage fraud scheme.”

As I reported on February 3rd, as well as on the February 23rd, Real Estate Fraud is booming in Canada. Click here for an excellent article from the Saskatoon StarPhoenix on just how serious the problem has become.

Finally, the Atlanta Business Chronicle is reporting that a husband and wife team have been sent to prison and ordered to pay more than $2.5 million in fines for mortgage and bankruptcy fraud. According to the Atlanta Business Chronicle, Hurb Grant was sentenced last week by a U.S. District Judge to three years in prison and ordered to pay $1.3 million restitution for bankruptcy fraud related to a scheme to retain fraudulently acquired properties, while his wife, Jennifer, was sentenced in January to five years in prison and ordered to pay $1.3 million restitution. Click here for the Atlanta Business Chronicle’s article on Hurb and Jennifer Grant.

Canada’s largest title insurer has gone on record as saying that the average case of real estate fraud in that country is costing consumers nearly $300,000 in loses. As I wrote earlier this month (scroll down to my February 3rd entry), the Law Society of British Columbia, after four years of investigations, recently approved $32.5 million in payments to cover a real estate fraud case involving Vancouver lawyer Martin Wirick. The high-profile case involved transactions between 1998 and 2002, and affected hundreds of consumers. Because of that case, lawyers in British Columbia now contribute to a special compensation fund to reimburse consumers for losses associated with fraud and lawyer-related issues.

A basic title fraud scam in Canada is no different than the same scam anywhere else: a fraudster targets a house, forges a transfer deed, registers it in his own name, forges a discharge of the existing mortgage and borrows against the clear title. And unlike credit card fraud–which Canadian authorities say average out to about $1,200 in losses per case–where banks allow victims to suspend payment until an investigation takes place, there’s no protection when a mortgage is fraudulently charged against a property. Title insurance, according to Canadian authorities, is one way for consumers to buy peace of mind.

“The onus is on the homeowner to prove the crime, and it can be very costly to restore your title,” says Wayne Proctor, First Canadian Title’s Pacific Region Director. “For a one-time premium, title insurance is one effective and inexpensive way to ensure your property is protected. It covers all legal expenses related to restoring a title and is available to existing home owners long after they have purchased their properties.”

The surge in real estate title fraud and identity theft cases in recent years has prompted First Canadian Title to embark on an awareness campaign to educate consumers as well as the legal, law enforcement and lending communities about the dangers associated with real estate fraud. Hopefully, the result will be a renewed sense of industry collaboration and increased awareness among consumers. Also, the need for increased diligence and implementing strict prevention measures when it comes to reviewing real estate transactions has not been lost on First Canadian Title.

“Last year alone, our underwriting department prevented approximately $19 million in what we believe to be fraud claims,” says Susan Leslie, First Canadian Title’s VP of Claims and Underwriting. “We’re simply becoming better at recognizing the tell-tale signs when something is not right.”

According to Proctor, there are several indicators that serve as warning signs to real estate professionals for potentially fraudulent activity during a purchase or refinance transaction. These include:

- Inquiries and established credit are inconsistent with age, income or profession.
- Instructions that funds are to be paid to an unrelated third party individual.
- Counter check presented for deposit or identification instead of a personalized check.
- Employment information provided cannot be verified.
- Client(s) will only provide a cellular number for contact purposes.

Finally, the Quebec Association of Real Estate Agents and Brokers reports that mortgage fraud amounts to an estimated $1.5 billion a year in loses, and even though cities like Vancouver, Toronto and Edmonton and are hotbeds for this sort of criminal activity, all Canadian homeowners are at risk. In the year 2000, real estate title fraud claims accounted for only six percent (6%) of total dollars paid in claims at First Canadian Title. By 2005, that number reached a whopping thirty-three percent (33%).

On the heels of news that the Law Society of British Columbia has approved $32,500,000.00 in payments to cover consumer claims in a real estate fraud case involving former Vancouver lawyer Martin Wirick, the Canada Mortgage and Housing Corporation (CMHC)–which holds its 2006 Housing Outlook Conference today in Saskatoon, Saskatchewan–has announced that it is stepping up its own efforts in the fight against real estate and mortgage fraud. According to CMHC, Marie Dyck, Senior Advisor on Fraud in CMHC’s Insurance and Securitization Sector will present in depth information to the conference’s attendees later today on current trends in mortgage fraud and how lenders can protect themselves and their customers.

The story of Martin Wirick first came to light in May 2002. Wirick worked on behalf of Vancouver real estate developer Tarsem Gill on the sale of numerous properties. At the time of his resignation, Wirick admitted that he had misappropriated trust funds in real estate transactions by failing to pay out and discharge mortgages, and had instead applied the funds to other purposes, which were clearly in breach of the law. The Law Society immediately took steps to protect Wirick’s clients and other affected parties. They conducted an audit and investigation, sought the appointment of a custodian for Wirick’s legal practice, and ensured that the claims of innocent homeowners were given priority consideration. January’s announcement that the Law Society’s Special Compensation Fund Committee had completed its review of 555 innocent homeowners’ claims resulted in $32,500,000.00 in payments to cover Wirick’s fraudulent activities.

The Quebec Association of Real Estate Agents and Brokers estimates that mortgage fraud losses in Canada are nearly $1.5 billion per year, while the Real Estate Council of Alberta’s own measurement of fraud over a recent 12 month period discovered 2,700 occurrences in Alberta alone. And get this… according to Susan Leslie, Vice President of Claims and Underwriting for First Canadian Title, in 2004, mortgage fraud accounted for thirty-six percent (36) of the claims her company paid, whereas in 2000, that number was closer to fifteen percent (15%).

Clearly, real estate fraud is alive and well in Canada.