What is Due Diligence in Mortgage Transactions

Posted on March 20, 2024

What is Due Diligence in Mortgage Transactions

Now more than ever, mortgage fraud is a problem for property buyers. With many buyers looking into mortgages, being new or first-time homeowners, there is often a lot that's new, leaving more opportunities for fraudsters to take advantage of. There are many different ways that fraudulent behaviour can occur with mortgage fraud, including title fraud, artificial property values, and more. Contact a reliable and trusted civil litigation lawyer near you to protect you from fraud. 

If you notice signs that you may have been frauded, don't hesitate to contact the Karrass Law team to book a legal consultation with our experienced civil fraud lawyers. Robert Karrass and our team will carefully analyze your situation and help you take action effectively. Buying a house or investing in property is not just about picking the correct location or negotiating the best price. It's also about making sure that your investment is safe and sound. 

This is where due diligence in mortgage transactions comes into play. If you are concerned about mortgage fraud, here is what you need to know about due diligence in these transactions.

What is Due Diligence?

In the context of mortgage transactions, due diligence is essentially the homework done before finalizing a deal. It involves verifying all the property details, the seller, and the buyer to ensure everything is in order. This isn't just about making sure the house exists and is in good condition; it's about diving deeper into the legal and financial aspects of the deal.

The responsibility of due diligence in loan and mortgage transactions typically is split between two parties: the lender and your real estate lawyer. 

Lender Due Diligence

  • Checking Identification: The institution issuing the loan should meet personally with the borrower(s) and obtain two pieces of original identification, one of which must be a government-issued photo ID. They must also examine the identification for irregularities, retain photocopies, or note the identification details. At this point, the lending institution should also verify any information from the loan application using other sources. 
  • Verification of the Transaction: The lender should verify the transaction by ensuring the registered owner is selling or mortgaging the property, checking that the property value is accurate, and reviewing the application and its supporting documentation for any discrepancies or other suspicious elements. 
  • Timely Registration of Discharge of Mortgages: If the lender does not instruct the borrower's lawyer for discharge registration, the lender must register the discharge no later than 60 days after the mortgage has been paid in full.

Lawyer Due Diligence

  • Looking into the Property's History: Lawyers examine all the legal documents about the property to ensure that you can legally buy or sell it.
  • Property Value Checks: They see if the property's selling price makes sense based on past sales. They're on the lookout for anything that doesn't add up, which could mean trouble.
  • Approval for Paperwork: Before any legal documents are officially recorded, your lawyer will get a written okay from you. This means you agree to what's being done.
  • Keeping the Lender in the Loop: After everything is done, your lawyer will tell the lender how everything went and send them a copy of the mortgage. This has to be done within 60 days of everything being signed and sealed, or sooner if needed.

Your lawyer is responsible for checking on the various elements of your loan transaction to keep you safe from fraud and ensure your property purchase goes smoothly. If your lender or real estate lawyer has not fulfilled their due diligence, contact your civil litigation lawyer to learn how you can protect yourself and take the appropriate legal action. 

Why Does Due Diligence Matter?

Most people think their home is the most substantial financial investment they'll make. When investing a significant amount of your money in your dream home, you don't want to find out later that legal issues interfere with your ability to own it, such as false identities on the property title or undisclosed debts or liens attached to it. Due diligence is meant to protect all parties involved in the transaction. 

How Can a Civil Fraud Lawyer Help You?

The expertise of a civil fraud lawyer or a civil litigation lawyer can be invaluable. Such legal professionals specialize in identifying and addressing any irregularities or issues that might pose a risk. Whether it's a discrepancy in the property's documents or a potential case of fraud, having an expert on your side can make all the difference.

A legal consultation with these professionals can provide peace of mind by ensuring that all legal aspects of the transaction are clear and secure. This is especially crucial in complex deals or situations with a higher risk of disputes or fraud. 

What Happens if Fraud is Detected?

Upon detecting fraud or any irregularity during the due diligence process, the immediate step is to halt the transaction. This pause allows time for a thorough investigation, preventing further risk to you or any other parties involved. It's best to seek legal advice from your civil fraud lawyer, who will guide you through the following steps, which typically include:

  • In-Depth Investigation: A detailed investigation to understand the scope and impact of the fraud. This may involve gathering more evidence, interviewing involved parties, and working with forensic experts.
  • Strategy Development: Following the investigation, you'll have a strategic session with your lawyer to discuss the findings and outline the best course of action. This could range from negotiation and settlement with the other party to preparing for legal action.
  • Initiating Legal Actions: If necessary, your civil fraud lawyer will take legal action against the parties involved in the fraud. This could include filing a lawsuit for damages or seeking injunctive relief to prevent further harm. At Karrass Law, our team will work to seek the best possible outcome in this situation in your best interest. 

Address Mortgage Fraud with the Experts at Karrass Law

Mortgage fraud can be tricky for the average property buyer or seller. If you've been the victim of fraud, don't be ashamed; instead, take action with a zealous, trustworthy, and results-oriented legal team. The expert civil litigation lawyers in Toronto at Karrass Law will work with you to help you fight fraud and get the damages you're owed.

Contact Us Today to Book Your Legal Consultation.

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