Mortgage Fraud Scams Hit Calgary

As Rainbow Investigations has reported earlier this year, the U.S. has been hit with ongoing huge mortgage fraud scams.

Unfortunately, within the scam world, once someone learns of a concept, it often is just a matter of time before the concept spreads to new areas.

During the summer of 2008 Rainbow Investigations has become aware of a handful of victims of mortgage fraud right here within Calgary, Alberta. Typically these victims tend to be women, and for a variety of reasons, these victims are not people one would expect to be revenue property owners.

As well, we have had numerous people mention to us, usually in very vague terms, that there are more similar mortgage fraud victims out there. Rainbow Investigations has tried to follow up with a number of these other possible “victims”, [for the sole purpose for us to get the story, and assist in getting the information to appropriate authorities], but, and somewhat understandably, the affected people tend to not be real excited to share their misfortune. Unfortunately, from what information we have found, some of these victims apparently will have financial repercussions for many years to come.

While there are some differences in each situation, there seems to be a basic concept to this scam.

First of all there is a person or a perpetrator who is interested in “flipping properties”. This first person comes to own a property or properties, often for a very short period of time - sometimes less than one day. Then the perpetrator sends out “signals” to friends, business associates and/or colleagues that he needs to have someone take a property off his hands.

A potential “victim” is then found, and from what have seen, these “victims” tend to be either young women, (some in their very early 20’s in age), or otherwise vulnerable women.

The “victim” is then induced into getting involved with the perpetrator either by a financial upfront incentive (a number of younger victims have actually been paid up to $5,000 in cash!), or some other incentive.

The previously described property is then “sold” immediately to the victim for a price way in excess of the buying price that the perpetrator paid for the property. Often, the perpetrator makes a $60,000 to $70,000 profit on the day of closing!

In some cases the victim knows they are purchasing the property, but the victim is told by the perpetrator that they are just needed to own the property for a couple of months, after which the perpetrator promises “to look after everything”. Sometimes, for a few months after closing, the perpetrator will make initial mortgage payments, and actually manage the property he no longer owns.

However, in one other case, we have had a victim who didn’t even understand they were buying a property!

The next step in the scam, once a victim is found, is that the perpetrator arranges for the “victim buyer” to get a mortgage. But the information to qualify for the mortgage is simply made up by the perpetrator. In all cases we are aware of, the “victim buyer” is fraudulently promoted as having some sort of high income job, usually at least 3 times in excess of what they are really earning.

One particular example we are familiar with, a 20 yr old female victim who actually works at a fast food pizza outlet, was promoted as having a job at a construction firm as a bookkeeper with a salary at least 3 times in excess of her actual income. The construction firm actually does not exist.

Then the perpetrator provides this fraudulent information to a mortgage broker, who then sells it to a mortgage provider. We have had a number of the different national banks that have bought this info, as well as other mortgage providers. So now the “victim buyer” has a mortgage on the property.

But where the scam really stings is right here. The arranged mortgage by the perpetrator is ALWAYS hugely in excess of the actual value of the property. In one case, a property that was really worth in the area of $325,000 was sold to the victim buyer for about $445,000 with a mortgage on title in the area of $430,000.

Then the perpetrator arranges with a real estate paralegal at a law office, (or in some cases, a paralegal doing work on behalf of a lawyer at an off site location), to the have the “victim buyer” come in to sign prepared documents such as the property transfer, and the mortgage for the property. Usually this is done with the perpetrator present, and in some cases, the perpetrator has actually taken the signed documents with him.

In not one of the half dozen files we are directly aware of did the “victim buyer” ever meet or even know who the lawyer was who was supposed to be conveying this transaction.

The end result of the transactions is this. Once the law office completes a balance of the transactions, the perpetrator get a sizeable cheque as a “cash to close” because of the high mortgage the victim has taken on. Now the “victim buyer” owns a property to which they have paid more than the property is worth, and many times the “victim buyer” simply cannot support the mortgage payments.

In some cases, the “victim buyer” has been able to recover the property, and make it work, and therefore, has held on to the property.

But with many of the younger victims, the property goes into foreclosure. The mortgage provider then starts the foreclosure procedure by serving a Statement of Claim on the “victim buyer” who is the registered owner of the property. Obviously, the mortgage provider desires to obtain the asset of the mortgage, the actual property.

But, in addition, because the asset (the actual property) does not have enough value to support the defaulted mortgage, the mortgage provider then sues the “victim buyer” for the difference between the outstanding mortgage, and the property value. In cases we have seen, this can be anywhere from $45,000 to $125,000! So now the “victim buyer” must secure legal advice to deal with this situation.

In at least one case, a very young “victim buyer” has had to declare bankruptcy. But the national bank is still pursuing the “victim buyer” for the difference in value from the foreclosed property.

Meanwhile the original perpetrator is long out of the picture by now.

Rainbow Investigations has provided a very detailed summary of one specific situation to the Calgary Police Commercial Crime Unit, and the Real Estate Council of Alberta. We will be communicating other specific complete files to authorities once we have all the details.

However, sad as it is, we are sure there are more victims out there than the 5 “victim buyers” involving 6 different properties that we are aware of.

It is essential that people who have had this brutal scam imposed on them tell their story; so that the people who are supposed to be running this province and enforcing property transfer rules, and mortgage qualifying rules for brokers get a grasp of this situation.

Any victims of this type of fraud should report this situation to their District Office of the Calgary Police Service. If a realtor is involved, the Real Estate Council of Alberta should be contacted.

Rainbow Investigations is willing to discuss in confidence and assist any victims in reporting this fraud to appropriate authorities. The best way to reach us is through email at rrpi2@telus.net.

There is no way we should be allowing a Northeast Calgary female who is 20 to 22 years old to pay tens of thousands of dollars for years because she was induced into a mortgage fraud which she didn't understand, while the ultimate perpetrator moves on and does not get punished.

We need action to get this kind of fraud out of Calgary.

Ron Reinhold

Rainbow Investigations.

Date of Story: Wednesday, September 03, 2008
Story Posted By: Ron Reinhold
Source: Ron Reinhold

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