Types of Mortgage Fraud
Posted on February 13, 2025
Getting caught up in mortgage fraud can be very frightening when facing criminal charges or after being named in a civil lawsuit. Mortgage fraud is more than a financial offence. It can be met with serious legal consequences that require the expertise of an experienced fraud lawyer to help you navigate the intricacies of the situation. When you work with the trusted defence and civil litigation lawyers at Karrass Law, you can be confident that our team will advocate for you so you receive the best results possible. If you’ve found yourself caught up in the web of mortgage fraud, book a legal consultation with our civil litigation and defence lawyers near you.
Here are some of the different types of mortgage fraud. To understand more and learn how to strengthen your defence, read on.
Income Fraud
Income fraud occurs when a borrower provides false or exaggerated income details to secure a mortgage. Income fraud can occur when there are forged pay stubs, fake employment letters, or falsified tax returns that intentionally misrepresent a person’s income. Since lenders use income verification to assess repayment ability, misrepresenting your income can result in loan default, foreclosure, and legal action. In Ontario, this can lead to charges of fraud over $5,000 under Section 380(1) of the Criminal Code, which carries a penalty of up to 14 years in prison.
Foreclosure Fraud
This type of fraud typically occurs when vulnerable or low-income individuals are at risk of defaulting on their mortgage or who are currently in foreclosure when a mortgage fraud approaches the owner with a fake debt consolidation plan in which the homeowner pays fees and transfers the title to the perpetrator of the scheme. During foreclosure fraud, homeowners will typically receive upfront cash, but the fraudster neglects payments, bills, and tax payments, which leaves the homeowner in trouble. The perpetrator of the foreclosure fraud may also re-mortgage or sell the property. If you’ve found yourself affected by a foreclosure scheme, contact a skilled fraud lawyer who can help you fight for your property and what is rightfully yours.
Fraud for Housing
One of the most common types of mortgage fraud is fraud for housing, where misleading or incorrect personal information is provided on a mortgage application to ensure qualification for a mortgage where you otherwise would not qualify. It would also be considered fraud to say you are going to live in a property when applying for a mortgage loan when you have no intention to live in it or occupy it, leaving the loan to be the responsibility of another party. If you have misrepresented your personal information on a mortgage application or have been advised to do so by a mortgage professional, book a legal consultation with Robert Karrass and the trusted civil litigation lawyers and defence lawyers at Karrass Law.
Title Fraud
Title fraud is one of the most devastating forms of mortgage fraud in Ontario. It occurs when a fraudster steals someone’s identity, forges property ownership documents, and takes out a mortgage in the victim’s name. Homeowners often do not realize their property has been compromised until they receive foreclosure notices or collection demands from the bank. This type of fraud can lead to severe financial and legal consequences, making it essential to understand how it happens and what legal options are available.
Fraud for Profit or Strawbuyer Fraud
Fraud for profit is a scheme in which multiple individuals collaborate to manipulate mortgage transactions for financial gain. This can involve artificially inflating property values or securing loans for properties that don’t actually exist. Unlike fraud for housing—where a borrower misrepresents information simply to qualify for a home—fraud for profit is often more organized, involving real estate professionals, appraisers, or even insiders at lending institutions.
One common tactic in fraud-for-profit schemes is straw buyer fraud. A straw buyer is someone who applies for a mortgage on behalf of another person who cannot qualify due to poor credit, insufficient income, or legal issues. The real borrower may promise to make the payments, but once the loan is approved, they often default, leaving the straw buyer legally responsible for the mortgage. Because the straw buyer’s name and credit were used, lenders hold them accountable for repayment—even if they never intended to own the property.
Participating in a straw buyer scheme is illegal and can lead to criminal charges and civil litigation. If you are facing accusations of mortgage fraud or financial liability in such cases, you should seek legal advice immediately from a reputable lawyer. At Karrass Law, our fraud lawyers and civil litigation lawyers provide experienced representation to defend your rights and navigate complex mortgage fraud disputes. If you’ve been caught in a fraudulent mortgage scheme, contact our team for strategic legal guidance.
Strengthen Your Defence Against Mortgage Fraud with Karrass Law
The penalties for mortgage fraud can range from thousands of dollars in fines to prison sentences and restitution payments. To protect your interests and ensure you come out of this financial and legal situation with the best possible results, talk to the skilled and reputable lawyers and legal experts at Karrass Law. Our team will be thorough and dedicated to your case without judgment.