American entertainer P.T. Barnum once said “There’s a sucker born every minute,” and the sad fact is that, even in the mostly honest culture of Canada, there are some predators in the mortgage business who take advantage of their trusting customers. That does not mean that you should never think about buying a home; it does mean that you should move forward with common sense. Take a look at some of the hazards for you to avoid as a homeowner when it comes to your property.
The dangers of identity theft
When you give people access to your personal information, you can end up paying a huge price. Actress Elizabeth Shepherd found herself on an extended stint of shows in New York City, and so she rented out her home in Toronto – for $6,500 up front. Her bank called her while she was still on the road to find out if she had really sold the house. She had not – but the con artists had! It took two years in the courts for her to get her home back to her. The con artists had stolen her identity and used it to take her house from her. She had the funds to pay lawyers to get the house back, but there are other Canadians without the same resources who have lost their homes.
Watch out for title fraud
Elizabeth Shepherd saw this happen – but this can also happen when someone steals your identity, takes out a second mortgage on your home, and then runs off with the cash. You probably would not find out until that new bank started calling you because that loan was in default. Want some tips to avoid this sort of nonsense?
Do not give your personal information to anyone you do not know and until you know how that information will be put to use.
If people call or email for your bank information, credit card passwords or other sensitive data, ignore them.
Check your bank statements and other financial statements regularly to watch out for transactions that you did not make.
If a bill goes missing, contact the provider or creditor to find the status.
Before you throw any documents away, run them through a shredder.
Check your credit report regularly – contact Equifax Canada and TransUnion Canada.
Make sure your broker has a brick-and-mortar presence
A lender or mortgage broker should have an address with an actual office. Some online lenders have a minimalist approach to this, which means that you should not expect plush carpets and an expensive coffee machine. But if the broker does not have an address or office, that is a red flag, so check that out.
Do not deal with unlicensed mortgage brokers
It is a crime in Ontario to perform work as a mortgage broker without a license. However, that does not keep fraudsters from putting up signs that offer such things as “home equity loans” no matter what your credit score might be. The FSCO (Financial Services Commissioner of Ontario) has a list on its website of all licensed brokerages, brokers and agents. If a broker talking to you is not on this list, stop dealing with him or her immediately.
Check out the online reviews
If a mortgage broker has served a number of clients, you should be able to find the perspective that prior clients have on their quality. If you run a Google search with the broker’s name followed by the word “reviews,” you should be able to find information. It does take some time, but the time is worth avoiding a scam. There may be some people who complain (because people do), but if you cannot find any reviews, that is an issue as well.
Refuse to pay upfront fees
Some scam artists ask for an upfront payment on a loan that you have not received. Sometimes it is such a low payment that you just send it in without thinking about it (sometimes as low as $40 or $50), and sometimes it is high enough that you think it sounds legitimate ($1000 or so). Either way, you have made a mistake, because these scam artists will then vanish, and you won’t get your funding – or your payment back. No matter what their excuse is, there is no legitimate reason for a loan company to ask for a payment before you get your funding. If you get a request for a payment upfront, it is time to find a new lender or broker.
Always, always read the fine print
If a mortgage broker tells you “you don’t need to read that,” then it is time to read it – and take it to a lawyer. A mortgage will likely be your business transaction. Some fraudsters have gotten homeowners to sign away their deeds without checking them, and others have gotten people to sign paperwork committing them to interest rates far above what they should pay – after promising that the paperwork really was for a loan that would save them money. Go get a second legal opinion if you have any questions – before you sign anything.
Watch out for the “bait and switch”
This refers to any sort of promise in which a broker promises you something but then delivers something else when it is time to sign. You might get a call offering you renewal at 2 percent for ten years, but when you go in and sign, it is really nine percent for three years. Or 29 percent. You might also get a call from someone promising to have a license as a broker but actually have nothing of the kind. You need to build a relationship with your mortgage broker – and take time to go through everything before signing.
Here are some links, sorted by province, to help you find out if the broker who has contacted you is actually licensed to deal with mortgages:
- https://www.fic.gov.bc.ca/web_listings/mbsblisting.aspx – (Search Mortgage Broker & Sub Broker