Monday, July 13, 2009

Mortgage Fraud

A poor misguided youth in Calgary was enticed by a "friend" to hold a mortgage in his name. He signed the mortgage docs in the back of a car with no legal counsel. He qualified for and got over $800,000 worth of mortgages on two properties.

"Even though Jason had a reported income of less than $20,000 the previous year, a large Canadian bank approved him for two mortgages: one worth $550,000, the other worth $300,000, for a total of $850,000.

He never met anyone from the bank, never saw the houses, never planned to live in them and doesn't even know where they are located."

It's sad that Jason is in this mess but it's a pretty silly thing to do. If you're signing legal documents in the back of a car without talking to anybody first you might imagine things may go south.

However, there is absolutely nothing wrong with holding a mortgage for someone else as an investment. Many investment companies do this as banks have tightened restrictions. The mortgage holder gets a cut of the profit at sale of the revenue property and monthly cash-flow. Jason should had gotten independent legal counsel and done much more due diligence on the deal.

A tough lesson for certain.

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