QUICK TAKEAWAY
Mortgage Fraud: Section 385 of the Criminal Code states you can be charged with mortgage fraud if you deliberately misrepresent information to obtain mortgage financing that would not have been granted if the truth had been known. There are many other charges that are related to this crime, with maximum two-year sentences given for most, though five-year prison terms are possible for fraudulently registering a title. Finding inconsistencies in the Crown's financial evidence is one common defence for those charged.
Table of Contents:
What is Mortgage Fraud?
Section 385 of the Criminal Code makes it an offence for you to induce a purchaser, mortgagee or creditor to accept a mortgage but then conceal from them any encumbranceA burden or impediment on the title. According to a document from the Financial Services Commission of Ontario (Mortgage fraud: what you need to know), mortgage fraud occurs when anyone - including a mortgage broker, a real estate agent or a lawyer misrepresents information to obtain a mortgage that would not have been granted if the truth had been told. The commission adds that suspected fraudulent mortgage applications have increased by 52 per cent in Canada since 2013.
Types of Mortgage-Related Fraud
Fraudulent Concealment of Title Documents
Section 385 of the Code makes it illegal for you or others involved in the transaction to induce someone to accept title documents that conceal any settlement or encumbrance on the title.
Fraudulent Registration of Title
Section 386 of the Code makes it illegal for you or others to make false statements or representations when registering a title to a property.
Fraudulent Sale of Real Property
Section 387 of the Code makes it illegal for you or others to be aware of a prior sale or of an existing lien, unregistered grant, mortgage or encumbrance on a property and not disclose it.
Misleading Receipt
Section 388 of the Code makes it illegal for you or others to give someone a fraudulent receipt for a property, whether or not you know the person being defrauded.
Fraudulent Disposal of Goods on Which Money Advanced
Section 389 of the Code makes it illegal for you to assist in the storage or disposal of material obtained through fraud. This law applies to those who own buildings or an agent or a carrier of anything obtained by fraud.
Fraudulent Receipts Under Bank Act
Section 390 of the Code makes it illegal for you to make a false statement in any receipt or certificate mentioned in the Bank Act, or if you provided another person with information so that they could make that false statement.
Disposal of Property to Defraud Creditors
Section 392 of the Code makes it illegal for you to assist in the concealment or disposal of property used in a fraud. This includes transferring or disposing of the property.
What Has to be Proven to Convict
For the Crown to find you guilty of mortgage or related frauds, they must demonstrate beyond a reasonable doubt that "by deceit, falsehood or other fraudulent means" you defrauded another person or a company. In many cases, the Crown’s evidence will be financial records and documents, which your defence lawyer can analyze for inconsistencies. The Crown must also show that a financial loss occurred and that you purposefully committed some action to cause that to happen.
Mortgage Fraud a Hybrid Offence
Canadian courts deal with offences in three ways. A summary offenceLess-serious criminal offences is for less serious crimes such as thefts under $5,000, while an indictable offenceIndictable offences are more-serious criminal offences includes murder, sexual assault and aggravated assault. In between those two is a hybrid offenceAn offence prosecuted either as a summary conviction or as an indictable offence which includes mortgage fraud, where the Crown can deal with it as either a summary or indictable offence.
Penalties for Mortgage Fraud
If a mortgage or related charge is treated as an indictable offence, the maximum penalty is two years behind bars. If it is treated as a summary conviction, a lesser penalty will be handed down. The one exception to this is with the charge of fraudulently registering a title, It carries a maximum penalty of a five-year prison term if it is treated as an indictable offence.
Defences For Those Charged with Fraud
In many mortgage fraud cases, the Crown’s evidence will be financial records. Since any financial document can be interpreted in different ways, your defence lawyer can analyze them for inconsistencies and try to find gaps in the Crown’s evidence. An essential element of a fraud conviction is proving that the victim suffered a loss. If that loss cannot be shown, that weakens the Crown’s case.
A viable defence is that you did not intend to commit fraud, as criminal intent has to be proven with any crime. Another defence would be that your rights under the Canadian Charter of Rights and Freedoms were breached during the police investigation. If the police conducted an unlawful search and seizure to obtain evidence, your lawyer can ask the court to exclude that evidence. In all cases, a successful defence is built on the facts of the case.
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Laws & Beyond
Glossary of Legal Terms
Encumbrance
An interest or right to a property by someone who is not the homeowner. This will adversely affects a real property's use and value.
Hybrid offence
Hybrid offences fall between a summary and an indictable offence. The Crown prosecutor chooses whether to treat the offence as a summary or indictable offence.
Indictable offence
Indictable offences are the most serious offences under the Criminal Code and they come with more serious punishments, up to a maximum penalty of life in prison.
Summary offence
Summary offences are less-serious criminal offences such as disturbing the peace or unlawful assembly
