Rainbow Investigations

- Real Estate Investigations and Mortgage Fraud -

(403) 651-9049 / (403) 245-0533

How Do Most People Perceive Real Estate?

Do You Know What Is Happening in Calgary?
Here are some examples!

This is only a small sampling of dozens upon dozens of mortgage fraud files in Calgary right now.

There are several apartment buildings in Calgary where the entire building is in foreclosure!!

The Basics of Calgary Mortgage Fraud Scam

• 1st Step - Somebody, usually an unregulated “property investor”, picks up a foreclosed property at a discount price.
• 2nd Step - The “property investor” sends out signals, usually by word of mouth, that he would like someone to invest in the property, and as an inducement, the “property investor” is willing to pay someone cash to purchase the property (usually the inducement is $5,000 cash). The investor is looking for someone with good credit, and usually the person is not someone who would normally be a property investor (many students, new Canadians, people from other cities have been victims).
• 3rd Step - The investor arranges a mortgage for the “victim buyer” or "straw-buyer", usually through a broker. The mortgage is a high ratio mortgage, and is way above the value of the property. The investor makes up fraudulent qualifying information of the “victim buyer”/ "straw-buyer".
• 4th Step - A “victim buyer”, or sometimes known as a "straw-buyer", is found and then the investor arranges for legal services at either a small law office, or with a non-lawyer real estate paralegal. The hired person doing the property conveying does the service for both the investor and the “victim buyer” or "straw-buyer". Sometimes the deal is the investor selling directly to the “victim buyer” / "straw-buyer"; other times it is a middle person buying the foreclosed property and reselling to the “victim buyer” / "straw-buyer".
• 5th Step - Once the transaction is actually completed, the seller (the property investor) actually manages the property for the first while, and makes payments on the mortgage for the “victim buyer” / "straw-buyer".
• Collapse - At some point, usually after 6 months to a year, the “plan” collapses. The investor tries to get another person to "buy" the property and assume the mortgage, (usually from a person who cannot qualify otherwise for a mortgage), but often this "plan" is not successful. As a result, now the property investor takes off, or no longer supports the property. The property which is in the name of the “victim buyer” / "straw-buyer" and this person on title is now responsible for mortgage payments, as well as management of the property.
  
  Very often, the "victim buyer" / "straw-buyer" cannot make the mortgage payments, and the property goes into foreclosure. At this point, the mortgage pay-out is way more than the property is worth (called a mortgage deficiency judgment).
  
  Once in foreclosure, as part of the legal proceeding, the bank typically takes back the property, and also attempts to collect the mortgage deficiency (anywhere from $50,000 to $250,000) from the “victim buyer” / "straw-buyer". This procedure, in legal terms, is called a "Rice Order".
  
  Many "straw-buyers" simply have to go into personal bankruptcy to pay the deficiency judgment.

Ron Reinhold recently had an article published in the AMBA Winter 2009 magazine. To read the article simply click on the image to the right. (Broken Trust 1.08mb) Adobe Reader Required

"Ron Reinhold will be doing a presentation about the Calgary mortgage fraud scene to the Real Property Section of the Canadian Bar Association on April 14th, 2010."

Red Flags To Mortgage Fraud

• Any ads on Kijiji, or the weekend Calgary Herald, or by mouth, where an investor is offering an inducement to take on a property ($5000 is the most common)
• Any ads where the proprietor is offering to “pay all legals”
• Any ads which suggest the property will only be in the buyers name for a few months only
• Any ads with low or very low down payments
• Any ads which promote taking over assumable mortgages “without qualifying”.

Here is a relevant link to a 2007 FBI report on mortgage fraud
that is worth your time to investigate!

Read How Rainbow Investigations
Can Help You Avoid This Fraud!

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