Mortgage Fraud Types 2021

Mortgage Fraud Faizal Garasia 15 Apr

This would probably be our shortest, most succinct, and truly direct-to-the-point blog post since we started providing you with informative posts and thought-provoking insights a couple of years back.

Our topic is closest to your heart and most serious to take for granted because this afflicts everyone – you, me, and the greater majority of people – who at one time fell prey to con artists and scammers.

Fraud has been pestering us for the greater part of our lives since emerging from our mothers’ wombs. We have been exposed to this “dissociative plague” through a variety of sources: false advertisements, dubious claims, unbelievable circumstances, hoaxes, and others that led us wandering in regret land after recovering our senses and learning that we had been taken for a ride!

Many types of fraud exist and one of the most troublesome is mortgage fraud. In this day and age of technology and virtual businesses, the internet has become a broad and endless ocean of scammers and fraudsters whose main intention is to hurt people – like you – and turn them into screaming zombies: mindless individuals who shriek in dismay AFTER discovering the truth behind the falsehood.

This post is addressed to everyone but more particularly to first-time home buyers and current homeowners since you are most susceptible to fraud. Fraudsters will be making use of your excitement and they will not stop at anything to make dreary fools out of all of you.

Unless you are as witty as Batman™ or as cognitive as Doctor Strange™, your only recourse is to pay real close attention to your instincts and learn to discern right from wrong.

If you’re ready to combat fraud then the bullets fly and let’s go…

Mortgage Fraud Definition

In its simplest and most concise meaning, mortgage fraud is the act of misrepresentation and deception. One perpetrator will purposely misrepresent information to deceive another individual (read: the unwilling victim).

This can be avoided if you will practice foresight and are always well informed of current trends most especially when applying mortgage for the first time.

Areas of Fraud in Mortgage

Surprisingly, there are two areas of interest in mortgage fraud: (1) profit fraud and (2) housing fraud.

Profit fraud happens when unscrupulous individuals make use of the mortgage contract NOT to secure you a house but to STEAL your money and equity.

Take note, too, that lenders can fall victims as well to this fraud type since there are circumstances that a third party (in this unfortunate case, the fraudster) is needed as a “bridge” between you (home buyer/borrower) and the lender (the creditor) to consummate the deal.
Housing fraud, on the other hand, is worse than profit frauds this involves the homeowner and another individual in cahoots with the former (i.e. an appraiser).

The former will misrepresent the financial details on a loan deal or even invite an “appraiser” to manipulate (i.e. bring down) the appraised value of the house.

This is considered downright illegal because the purpose presented here is the forced acquisition or ownership of the property without the lender being conscious about it.

Regardless of who is behind the fraud, it is considered a crime.

Technology, like any kind of trend, is now being used as a vehicle by these conscience-lacking individuals making “honest” mortgage brokers online look unreliable and this will hurt their reputation in the long run.

Practice diligence when dealing with so-called respectable mortgage advisors or lenders on the internet.

Do your research before committing your money and your future with these questionable individuals.

Other Types of Mortgage Fraud

1. Property Flipping – this is committed by purchasing a house, fixing it, and then selling it at a profit. Not all property flippers are fraudsters; however, it pays to be vigilant when dealing with people like these. Approach a reputable mortgage real estate advisor for the best courses of action to take when faced with this eventuality.

2. Occupancy Fraud – this crime is perpetrated by a con artist (i.e. a borrower) claiming that the property is soon getting occupied or habituated. This is purposely done to acquire satisfactory bank status without the bank knowing that the house is NOT GOING TO BE OCCUPIED ANYTIME SOON. The perks enjoyed by the scammer using this fraudulent transaction are lower mortgage rates and lower out-of-pocket costs, to name a few.

3. Straw Buyer Fraud – this con is utilized by a perpetrator by allowing someone to use THEIR OWN identity, credit score, and income – among others – and passing this information to any lender or mortgage agency and ALLOW another buyer who MAY NOT BE QUALIFIED to purchase a house. This one is voluntary since the fraudster is committing this on his/her own volition: nobody is forcing him/her to do this atrocious act.

4. Identity Theft – this is probably the worst type of fraud ever to surface since using the internet in conducting businesses on a global scale. This crime is instigated by an individual who uses – STEALS – vital information from UNWILLING VICTIMS.

5. Income/Asset Falsification – this is done in consonance with identity theft and involves the manipulation of bank records and even personal data like Social Security Number, Tax Returns, and even employment verification correspondences.

Professional Mortgage Loan Fraud

As if this list is not enough, we still have two types of professional mortgage fraud that are committed: (1) Air Loan and (2) Appraisal Fraud.

Air loan is committed by simply acquiring a non-existent property for an equally non-existent borrower.

What happens next is a sure candidate for Ripley’s Believe It or Not!™ show: the poser will inform the unsuspecting lender about an alleged buyer of an alleged property. Afterward – meaning all of the necessary vouching is done to verify the “truthfulness” of the transaction and passed all criteria – the lender will proceed in providing the loanable amount to the scammer.

Once this is consummated, the perpetrator vanishes a la David Copperfield™ along with the borrowed – read: stolen – money.


Ain’t this nifty, huh?

How this fraud escapes most mortgage experts is totally beyond us.

Appraisal fraud, on the other hand, is more of a group-oriented scam involving four main personalities; namely, a real estate agent, a builder, an appraiser, and a loan officer, respectively.

These individuals, to our mind, are the greatest worst infamous fraudulent “pop-group” of today’s putrid selection of scammers and con-artists. They try and make their shameless act appear grand for their version of perverted glory by destroying other people’s lives and dreams.

They are all in when doing their dastardly work: they will maximize any purchase price as well as swell up any loan amount for the sole purpose of increasing their commissions.

Fantastic! Wow! Really…!

(If you ever wondered how a poorly performing real estate agent ends up with the most beautiful condominium unit in the community then now you know. Hah!)

Generally speaking, despite the insertion of humor in the last section of our blog, these fraudsters are a menace to society. They disenfranchise anyone – be it a borrower or a lender – without giving any thought to how their actions will affect them.

First-time home buyers are most likely to fall victims to fraudsters because they know less about the whole mortgage contract game.

Much worse, if and when they become prey to these heartless and conscience-deprived individuals, they end up losing money and would bid, instead, for a loan from bad credit mortgage brokers who may or may not even be that trustworthy, to say the least.

There are still ways to fight back, though. Agencies like MBA (Mortgage Bankers Association) and NAMB (National Association of Mortgage Brokers) are your lifelines to assistance and guidance against mortgage fraud. You also have the Economic Crimes Unit – which is under the FBI – that monitors complaints and suspicious activities within the mortgage sector.

Final Thoughts

Fraud exists everywhere. You have to be certain that your transactions, most especially those that are mortgage-related, are handled by a reputable mortgage professional.

Do not be swayed by flowery words and empty promises from people who appear and sound “too good to be true”. Rely instead on your intellect and do your research diligently.

Be faithful in the proper mortgaging process because this is the only way that you can be assured of a long-lasting and harmonious relationship with yourself, your lender, and with your life for years to come.

If you encounter any fraudster or have been victimized by one then don’t hesitate to contact your local police or any federal-government anti-fraud unit for immediate assistance.


We are your best mortgage solutions provider in Canada founded by Faizal Garasia in 2019. We have a network to more than 90 lenders including the largest banks, credit unions, trust firms, and financial institutions across Canada.

Contact us at (416) 825 0142 or send an email to today for more information.

Will You Take a Second Mortgage?

General Faizal Garasia 3 Apr

Owning your own home is not easy as you think. There are so many things to attend to like completion of various government permits, payment of initial down payment, securing property insurance, etc.,  and contract(s) to sign like mortgage loan, contractor’s agreement, and miscellaneous clearances, to name a few.

If this is not enough, you also have to contend with credit score, credit investigation, and lender approval. The third one – lender approval – is what you must give priority to because this determines whether or not you will receive your loanable amount.

Once you succeed in getting approved for a mortgage loan, you can now proceed in either purchasing a house or building a new one. In some cases, a number of home owners will eventually resort to having a second mortgage to fund their initial mortgage.

How does this work and will it benefit the home owners in the long run?

In this blog, we will talk about second mortgage and how you can apply for one.

Dive in when you are ready…

Second Mortgage Defined

A second mortgage – also referred to as a second trust lien – is a loan type using your house as collateral. As such, a second mortgage commands a lower interest rate but with one caveat: this will call for additional service charges plus terminating costs that you will have to deal with.

Moreover, this type of loan takes on “second priority” in case you default on your initial mortgage amortization payments. If and when this happens, you will have to settle initially your first mortgage in full before payment to your second mortgage takes place.

You may find that a second mortgage appears to be more of a burden than a blessing but this is not always the case. Maybe if your credit score is wanting in positive remarks then getting a second mortgage could be a plan worth thinking about.

However, if you do not have any issues regarding your credit standing and you are not a risk to any lender then taking one can be good since you can consider this as a home buyer incentive.

Advantages and Disadvantages of Second Mortgage

If you are having plans in acquiring a second mortgage then it is best that you get informed of its advantages and disadvantages. The following are the benefits of getting one:

a. Loan amount – you can borrow up to a maximum of 85% of your property’s value depending on your lender. This value comprises all of your house loans including first and second mortgages, respectively.

b. Interest rates – second mortgage commands a lower rate of interest on your debt compared to conventional/traditional loans like credit cards.

c. Tax benefits – you can avail of a special deduction every time you pay interest on your second mortgage. We suggest seeking advice from a tax professional for more information regarding this perk.

The following, on the other hand, are the drawbacks of acquiring a second mortgage:

a. Risk of foreclosure – since your house is tendered as collateral, you face the risk of losing your property if you default on your monthly payments.

b. Loan costs – getting a second mortgage accompanies a number of costs and additional expenses that you need to settle prior to (and even after) the consummation of the contract.

c. Interest costs – while it is true that your second mortgage has lower interest rates, the interest costs incurred will be slightly higher compared to your first mortgage loan.

Regardless of the advantages and disadvantages presented, a second mortgage will continue to appeal to new home buyers like you most especially if you have plans on adding a complementary feature or in renovating a particular room/section inside your house.

Application of Second Mortgage

There are a number of uses for second mortgages and none of them are limited to any particular application like car loan, insurance loan, etc. These are as follows:

a. Home improvements – this refers to renovations. You have to sell your house at a higher price in order to settle your loan.

b. Avoiding PMI – private mortgage insurance can be avoided with a merger of loans and one method, in particular, is called the “piggyback strategy”. One example of this is the term “80/10/10” which indicates your initial mortgage’s loan-to-value ratio has to be at least 80% or lower in conjunction with your second mortgage.

c. Debt consolidation – you run the risk of losing your house when using a second mortgage as your means of paying off your other outstanding obligations. Since your property is on collateral, skipping on your monthly payments will automatically foreclose your home.

d. Education – this needs further scrutiny. There is nothing wrong in spending money on education but there are other much better options for this endeavor. We advise increasing your income opportunities instead of increasing your chances of foreclosing your property.

Do not rush yourself yet in applying for a second mortgage if your reason is any of the above. What you can do initially is conduct thorough research about other means of raising money to give you the
additional funds you badly need. You can also approach your nearest credit bureau and apply for a special government of Canada first time home buyers loan, if possible.

Additional Notes on Second Mortgage

You have to have the best sources to support your second mortgage bid should you decide to pursue this route. We can mention three of them and they are:

1. Local bank(s) or credit union(s)
2. Mortgage broker(s)
3. Online lender(s) – be wary of this one since there are many scammers on the internet.

Final Thoughts

Applying for a second mortgage is good for you. Although this may cause your property’s value to decrease, you have complete control over your finances since you will generally have only one lender to deal with.

Unlike other types of loans, your second mortgage can be placed with the same lender when you applied for your first mortgage.

Several uses can be derived from your second mortgage and all of them are unlimited in their scope. However, you stand the risk of property foreclosure if you become delinquent in skipping repayments on your loan.


We are your trusted mortgage solutions experts based in Canada founded by Faizal Garasia in 2019. We have access to more than 90 lenders including the largest banks, credit unions, trust firms, and financial institutions across Canada.

We help you understand and resolve issues regarding mortgages, finances, taxes, and other loan-related payments that impact your real estate plans.

Contact us at (416) 825 0142 or send an email to today for more information.