July 10, 2006

July 10, 2006: Mortgage Fraud

Mortgage Fraud -- html version Mar. 24, 2005, via newsbeat1 -- For the pdf format:
www.lsuc.on.ca/media/convmar05mortgagefraud.pdf.

33. Lawyers and other industry professionals must register with the company that created the online registry, Teranet, to obtain special encrypted diskettes that allow access to the land registry system. The system has an electronic audit trail that identifies transaction activity leading back to the user and his or her registered diskette. Both lawyers and non-lawyers can have access to diskettes.

34. Lost, sold, or stolen diskettes provide keys for fraudsters to access the electronic system. Once they have access to the system, fraudsters can perform any number of phony title transfers or fraudulent mortgage discharges. They can then present these fraudulent documents to lawyers and lenders, asking for a mortgage on a property that the fraudster appears to own. The ability to search addresses electronically and obtain title documents facilitates fraudsters obtaining credible information to assist them perpetrating a fraud by stealing the home on paper.

Types of Fraud

35. Fraudulent transactions often share common elements. Most common types of fraud include identity fraud and value fraud.

Identity Fraud

36. A consumer purchases a home. A fraudster in the neighborhood takes down the street number and accesses the electronic registration system and finds who is listed as holding title to the property, along with the details of any mortgage arrangements. The fraudster has obtained a diskette that allows access to the electronic registration system. The fraudster transfers the title and pays the registration fee and the applicable land transfer tax. Now the fraudster has title to
someone else’s home.

37. Just as easily, the fraudster gets rid of the mortgage registered on title by electronically creating and registering a discharge of the mortgage indicating that the mortgage has been paid off.

38. The fraudster goes to a lender and asks for a mortgage worth only half of the home’s value -- $100,000. Since his request for a mortgage loan is only half of the home’s worth, the lender forgoes an appraisal of the house.

39. The lender asks the fraudster’s lawyer to obtain the purchaser’s driving license. The lawyer finds that it is indeed the license of the person he is dealing with – the same person whose name is registered on title, which is showing free of any encumbrances (such as a mortgage) on the home.

40. Seven days later, the lender gives the lawyer of the fraudster – who knows nothing about the fraud -- $100,000. The unsuspecting lawyer completes the mortgage work and releases the mortgage funds to his client, the fraudster. Within months, the fraudster stops paying the mortgage. Now the lender is wondering what is happening and contacts the original homeowner. The unwitting lawyer, in the meantime, will be investigated.

41. There are many variations of identity fraud

42. The fraudster, for example, may have faked employment records. When the lender calls to check references, the caller is re-routed to the fraudster’s cell phone or a “phone boiler room,” owned by the fraudster, where many persons answer phones for many non-existent employers. The people who answer the phone verify the fraudster is an employee and confirm salary information.

43. In yet another example, the fraudster might pose as a lawyer representing a fictitious purchaser. The lender releases mortgage funds and instead of directing the funds to the fictitious purchaser and non-existent vendor, the fraudster re-routes them into an offshore personal bank account

44. The electronic nature of the real estate business contributes to the ability to engage in identity fraud, because increasingly no signatures are required – just access to a computer and a Teranet access disk. [....]

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