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Straw buyers: Innocent victims?

A friend or acquaintance approaches you with a "deal too good to be true." Offering you $8,000 simply to sign your name to some mortgage documents, and reassuring you that they will "take care of everything." As we now know, you end up with the property which might be valued at $300,000, but the mortgage, which you are now responsible for, is $400,000.

From CBC: "The Bank of Montreal is suing hundreds of people in Alberta, including lawyers, mortgage brokers and four of its own employees, in what is one of the largest alleged cases of mortgage fraud in Canadian history.

To carry out the alleged scheme, the bank claims masterminds would recruit what's known in fraud parlance as a 'straw buyer.' For a payment of $2,000 to $8,000, these straw buyers would allow their name to be used to obtain the mortgage on the house.

According to the court documents, the ringleaders created fake, inflated wage and net income documents for the straw buyers to make them appear richer than they were."

Read more: Bank of Montreal alleges huge mortgage fraud

Read more: Straw buyers: taking advantage of your good name

Are straw buyers innocent victims or greedy fraudsters? Or somewhere in between those two extremes?

This question has also been posted on My online poll

Posted: Thursday, May 06, 2010 8:20 AM by Bob Truman

Comments

Bob Truman said:

I was contacted last year by a "straw buyer" who, after realizing he'd been duped, wanted an evaluation on the property he'd inadvertently purchased(two of them actually). He was a school teacher.

One of the houses was vacant and in a complete state of disrepair, and worth perhaps $300,000. I believe the mortgage was around $500,000.

The con man behind the scheme had been a life-long friend, and he convinced a few others in their social circle to become "straw buyers."

# May 6, 2010 9:41 AM

Will said:

Greedy fraudsters I say.

If something seems to be too good to be true it typically is. Why on earth one would go ahead and buy properties like this is beyond me.

On another note, average and median are way up the first couple of days of may, while at the end of april we were clearly trending down. How come the big jump?

# May 6, 2010 10:24 AM

CM said:

Sounds familiar....

http://www.realestatechannel.com/us-markets/residential-real-estate-1/real-estate-news-mortgage-fraud-countrywide-new-century-mortgage-afg-financial-robert-morganthau-fitch-ratings-new-york-daily-news-huffington-post-2433.php

Greed runs rampant from Joe average right through to our elected reps...

"The Bank of Montreal is accusing Calgary Conservative MP Devinder Shory of having ties to what is believed to be Canada's largest mortgage fraud."

http://www.cbc.ca/canada/calgary/story/2010/05/05/mortgage-bank-shory.html

# May 6, 2010 11:49 AM

Norm Fisher said:

It seems to me that any adult who is mentally competent to look after their own affairs should understand that this is wrong, legally and morally. They're being paid to pose as a legit buyer using fake documents to dupe the lender. What reasonable argument could be made to explain this away?

# May 6, 2010 11:52 AM

TT said:

Yeah, off topic for the original post here but I have noticed the same thing as Will in the first few days of May.

To elaborate the question a bit - were we trending down at the end of April because lower-end homes were selling or are we trending up now because higher-end homes are selling?  In short, do either of these time frames exhibit exceptional deviations from normal activities?

Thanks!

# May 6, 2010 2:27 PM

Bob Truman said:

Speaking of scams, has anyone else seen one of these letters? If you have time to do some investigating, call the number and see what you can find out. My friend Dale received this in the mail.

Scam letter?

# May 6, 2010 6:04 PM

Vinny said:

Bob, Can you tell us what happened to your friend who was scammed.  Were they able to resolve it or does he have to pay the consequence for it?

He was someone who found me through this website. After I evaluated the properties, I don't know what transpired. I haven't seen the houses listed for sale. -Bob

# May 7, 2010 2:24 PM

Reader said:

Re letter to Dale

Well, if you google the phone number 403 774 9597, and follow the search results, you get an ad in the Calgary Herald.

http://www.classifiedscalgary.ca/ads/calgary-attention-i-buy-ad-184432/

# May 7, 2010 7:13 PM

Jen said:

My elderly in-laws who live in Glenbrook received a letter on yellow lined paper just like the one your friend Dale received. It looked hand written but in fact was printed. This was several months ago now. They never followed up but when they showed it to me I told them it was a scam and to ignore it

# May 9, 2010 8:54 PM

Bob Truman said:

How much impact would the alleged mortgage fraud have on the average price? In an individual community with not many sales, it would have a large effect. For the entire city, the effect would be small.

300 occurrences at an average of $100,000 per, I've made some calculations based on 2007 sales.

There were 18,438 sales with an average price of $472,230 in 2007.

Without the alleged mortgage fraud, it would put the average price down .36%(less than 1%). It would decrease the average price by $1678 to $470,552.

The alleged fraud didn't all happen all in one year, and I'm not sure how many cases there were or what the exact average amount was.

# May 10, 2010 9:13 AM

Grace said:

only BMO, no other banks?... I don;t think so.

# May 11, 2010 11:56 AM

Shawn said:

Hi Bob,  I am in the same predicament.  Whatever happened to your friend who was scammed?  What course of action can I take if I'm a victim of Straw Buying?

He was not known to me before he called, and I don't know what he eventually did. As for a course of action, see a lawyer. -Bob

# May 26, 2011 12:05 PM

Liz said:

So Shawn, what did your lawyer come up with?  Did you let the house go into receivership or are you trying to keep up the payments?

# June 20, 2011 11:31 AM
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