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Originally Posted by onetwo_threefour
I agree that the bank is overreaching on this stuff in terms of the professional duty they are trying impose on certain industry professionals, but ultimately it will be for the court to determine the standard of care in these cases.
CMHC published a list of fraud signs back in 2000 or 2001, I think troutman linked it, so I don't know whether the list last year is of much importance. Also, regardless of whether there was any notice sent out by the Law Society, the arguments would be that we should be able to recognize signs of fraud.
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Fair enough on the fraud argument, I just think that it is not as easy as the Bank says it is to recognize fraud. What happens if Party A purchases a place from a distressed buyer for 500K and has a closing date 90 days after the offer to purchase with the purpose being that they want to find a buyer at 550K in the intervening 3 months. In 06 the market was moving so quickly (38%) a year on average according to Century 21, that a person could conceivably enter into a country on March 1st, 2006 for a closing of June 1, 2006 for 500K, actually have 500K be the exact fair market value, but due to the increase in housing prices the place might be worth 550K by June 1, 2006. If they decide on May 1, 2010 to sell the place for 540K with the consent of the original vendor, you would perform a skip transfer because the middle guy was never actually going to own the property and they would want to avoid Land Titles fees. That situation would involve absolutely no fraud, but you would allegedly have to report the transaction to the bank, but I am pretty sure that is what their fancy computer system with the postal codes is for. Afterall, BMO's PR guy stated that they conduct the upmost diligence on these matters, which includes and is basically exclusive to, putting 100 houses in a postal code in a database, coming up with the median and stating that that is the number that they will fund.
The new trust conditions state that you have to advise them if the property has been transferred in the last 6 months, if you are a fraudster that is fine. You purchase the property throw a mortgage on it and wait 8 months to be safe and then you proceed with your original plan. Is the next lawsuit going to say that there was an implied condition to tell them of any transfers in the previous 12 months? 18 months? Until the Banks and CMHC tighten up their protocols, this will continue to occur. Why do you only need to show a bank an employment letter to get a mortgage? How easy are those to forge? Why not force individuals to show a T4 or a T1? That would at least prove income for the previous year and would reduce black market income as you would be in a position that you need to report income in order to get a mortgage. This is a huge public policy issue that I hope Harper addresses and as a liberal I hope the Grits actively try to assist him with.
I personally hope the Law Society defends this vigorously. I do not think it is the interest of the general public nor the lawyers to expand the role of lawyers. Lawyers should advise on your legal obligations, not on whether the home you are buying is a good price or whether you should buy an A&W or whatever. This article really sums up my opinion of where the fault lies, as a general rule, on real estate fraud.
http://www.canadianbusiness.com/mark...2357121&page=1