Update: Calgary MP Shory Accused in Giant Mortgage Fraud

[puckluck]

Originally Posted by Slava

I must have misunderstood. Are you saying that I buy a house with a mortgage of $500k. The scammer makes the mortgage $550k though, takes the extra $50k without my knowing, and I have to pay that amount back? I guess I'm really not to clear on how this really operates. I figured that your friend just made a quick $5k here and the risk was that the mortgage is in his name and he could risk a defaulted mortgage crushing his credit rating?

Yep that's exactly what is happening. My buddy has a bad credit rating and can't put anything under his name. The bank is selling his house and he's expected to lose a lot of money. He has hired a lawyer though so hopefully everything works out and that scumbag that I linked gets arrested.

[Hack&Lube]

So the straw buyers got screwed in this? I had assumed they made money as well. How do these guys offload these houses afterward?

[puckluck]

Originally Posted by Hack&Lube

So the straw buyers got screwed in this? I had assumed they made money as well. How do these guys offload these houses afterward?

They don't. They will rent out the house and pay the mortgage for a few months and then just bail on the house when their money is secured.

[Slava]

Originally Posted by puckluck

Yep that's exactly what is happening. My buddy has a bad credit rating and can't put anything under his name. The bank is selling his house and he's expected to lose a lot of money. He has hired a lawyer though so hopefully everything works out and that scumbag that I linked gets arrested.

Well all I'm going to say is that I figured that was how this was working and I still fail to see the "scam" part of the equation. I don't want to be a holier than jerk about things so I'm just going to leave it at that.

[puckluck]

Originally Posted by Slava

Well all I'm going to say is that I figured that was how this was working and I still fail to see the "scam" part of the equation. I don't want to be a holier than jerk about things so I'm just going to leave it at that.

You can't see a scam when a guy makes millions and leaves over inflated mortgages to straw buyers who obviously can't afford the house?

[psicodude]

I can't understand how the straw buyer isn't completely in on the scam. I mean, their income levels and assets are completely fake and they are getting a house they know they can't afford. Does the buyer just forfeit the loan and go bankrupt?

And if this happened a bunch of times, how did BMO not notice this earlier? Wouldn't someone say "well that's weird, we had 25 people walk away from a mortgage that was $50k more than the house was worth in the last 3 months"?

Maybe I just don't understand, but the buyer, real estate agent(s), mortgage broker, and lawyer would all have to be in on it...but everything gets blamed on a piece of software? Sounds like a few people at BMO were turning a blind eye in exchange for a few more commissions to me.

[Slava]

Originally Posted by puckluck

You can't see a scam when a guy makes millions and leaves over inflated mortgages to straw buyers who obviously can't afford the house?

No the part of the scam I can't see is how your buddy was "scammed" into anything at all honestly. If you really want to know its amazing to me that someone would fall for this, and probably tell others how dumb they were for not doing the same thing. I would guess he was saying something along the lines of how easy it was and how he made $5k doing nothing?

That is the part of the scam I didn't see. I get the over-valuation of the houses and the bank writing a mortgage for more than they ought to and things like that. I have a hard time feeling sorry for them as well. This is how the bank makes money and they get offered chances to lend money out all day, every day. If they don't like the valuation of the collateral then they should say no...that is just business.

[Deegee]

If only there was some way to get certified appraisals on properties.

[Azure]

Originally Posted by ken0042

Yeah, until the gov't mandates a $500 mortgage fee so banks can send out an appraser for each and every deal.

I have a little more faith in the current Canadian government though.

Believe it or not.

[Azure]

Originally Posted by puckluck

You can't see a scam when a guy makes millions and leaves over inflated mortgages to straw buyers who obviously can't afford the house?

Well, if you want to look at it that way, then whatever created the housing bubble in the US and the eventual crash was also a scam.

[puckluck]

Originally Posted by Slava

No the part of the scam I can't see is how your buddy was "scammed" into anything at all honestly. If you really want to know its amazing to me that someone would fall for this, and probably tell others how dumb they were for not doing the same thing. I would guess he was saying something along the lines of how easy it was and how he made $5k doing nothing?

That is the part of the scam I didn't see. I get the over-valuation of the houses and the bank writing a mortgage for more than they ought to and things like that. I have a hard time feeling sorry for them as well. This is how the bank makes money and they get offered chances to lend money out all day, every day. If they don't like the valuation of the collateral then they should say no...that is just business.

That I can agree with. He does have some blame for what happened but to what extent I really have no clue. He knew the guy that was asking people to do this and he thought he could trust him. The guy even scammed his own brother.

He thought he was simply helping a friend with a business opportunity and the house would be off his name in 6 months. In the end the courts will decide who was in the wrong or whether the straw buyers will be punished any further.

[puckluck]

Originally Posted by Azure

Well, if you want to look at it that way, then whatever created the housing bubble in the US and the eventual crash was also a scam.

War is a scam.

[4X4]

I've got a friend who was offered this deal, but was convinced that it was not so much fraud, but more of a grey area of the law. The way it was pitched to her was along the lines of 'you put up your name, we use your credit rating to buy a house for this other person over here that can afford it, but has no credit'. The compensation was a few grand, and there were promises left and right about how they'd rent the place out if the 'buyer' defaulted. She was totally convinced that these people had her credit as their top priority, and that it would be protected.
When she asked me my opinion on it, I just about choked on my lunch, but I had to keep in mind that not all people have reasonable understanding of how real estate and mortgages work. I mean, it may not be rocket science to most people, but to others, it's a completely different language. In her mind, doing this deal was no different than buying a car for someone else who was going to make the payments, and getting a few grand for the trouble.

Edit* I should probably change 'grey area of the law' to 'favour'.

[Da_Chief]

So..

-These guys look for cheap houses in nice neighborhood
-Get a straw buyer who gets paid some thousands for name use
-These guys get mortgage of ~50K extra and pocket the extra
-Lawyers are involved to process all of this
-Some bank people on the inside are also processing this
-The straw buyer owns the house with all the fake info (job etc)
-Couple months later they bail on the house
-The bank now gets ~50K less than the mortgage amount they gave out
-The straw buyer credit rating is down the toilet

Aight I see what's happening here. But BMO says they've lost $30 million during this scam. What I want to know how long was this going on till someone caught on? At an average difference of $50K it would mean about 600 of these mortgages were done for $30 million. if its a year, I guess over a year 600 people bailing on their houses in this economy isn't surprising.

The blame here falls on everyone; the straw buyer, bank, bank reps, these scammers, lawyers, agents.

Interesting how far people go to make a quick buck.

[RougeUnderoos]

Originally Posted by Azure

Well, if you want to look at it that way, then whatever created the housing bubble in the US and the eventual crash was also a scam.

Well yeah, that was a scam.

[Hack&Lube]

Originally Posted by Da_Chief

So..

-These guys look for cheap houses in nice neighborhood
-Get a straw buyer who gets paid some thousands for name use
-These guys get mortgage of ~50K extra and pocket the extra
-Lawyers are involved to process all of this
-Some bank people on the inside are also processing this
-The straw buyer owns the house with all the fake info (job etc)
-Couple months later they bail on the house
-The bank now gets ~50K less than the mortgage amount they gave out
-The straw buyer credit rating is down the toilet

Aight I see what's happening here. But BMO says they've lost $30 million during this scam. What I want to know how long was this going on till someone caught on? At an average difference of $50K it would mean about 600 of these mortgages were done for $30 million. if its a year, I guess over a year 600 people bailing on their houses in this economy isn't surprising.

The blame here falls on everyone; the straw buyer, bank, bank reps, these scammers, lawyers, agents.

Interesting how far people go to make a quick buck.

I still don't get the straw buyers bailing on the houses, how can you be talked into taking a mortage in your name that you can't afford? Do they bail when they realize they've been had?

I had assumed from that article that everybody scratched each other's backs and that's how this is maintained. You can't have poor immigrants defaulting on mortages left and right without someone going to the police, etc. and this thing exposed way earlier than 2006.

[Mr.Coffee]

Originally Posted by Patrick

Stop letting people into the country so easily? Problem solved.

hahaha yeah... good call, that's definitely the answer. No Canadian citizen would ever commit this type of fraud.

I think the reason it's so hard to feel bad for a bank is because... well... it's a bank. Maybe if they stopped seemingly screwing people so hard while regularly posting new-record profits every quarter, had their doors open past 3pm, or actually made a policy that diverged from the little oligopoly we live with here in Canada people may give a crap that they were actually harmed here.

Meanwhile, I agree that it remains the bank's sole responsibility for property valuation. If somebody is valuing the crappiest place on the block at an unreasonable offer, back away from the mortgage? Nobody is forcing a gun to the bank's head here- fraud notwithstanding nor excused.

[Da_Chief]

Originally Posted by Hack&Lube

I still don't get the straw buyers bailing on the houses, how can you be talked into taking a mortage in your name that you can't afford? Do they bail when they realize they've been had?

I had assumed from that article that everybody scratched each other's backs and that's how this is maintained. You can't have poor immigrants defaulting on mortages left and right without someone going to the police, etc. and this thing exposed way earlier than 2006.

I guess if you don't care for your credit rating and someone offers you $10K to put your name down, might as well do it. Thats the only way I see it, otherwise it doesn't make sense.

[Clarkey]

It's interesting to look at the list of names on the class action.... .... ...........

[AFireInside]

Originally Posted by Hack&Lube

I still don't get the straw buyers bailing on the houses, how can you be talked into taking a mortage in your name that you can't afford? Do they bail when they realize they've been had?

I had assumed from that article that everybody scratched each other's backs and that's how this is maintained. You can't have poor immigrants defaulting on mortages left and right without someone going to the police, etc. and this thing exposed way earlier than 2006.

I think the way it works is that the straw buyer doesn't actually live in the house. Their name is on the mortgage, "person B" makes the payments. The straw buyer is promised that the house will be rented out if person B can't make the payments, but what happens is everyone bails once the money is secured and the straw buyer is stuck with a mortgage in their name for more than the house was worth.

Person B can actually be the person selling the house, or colluding with someone else. So they sell the straw buyer a house for a lot more than it's worth, pocket the difference, and bail out on the property. The straw buyer may not even realize until they get served with papers.