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Jane Kinsella
The Real Estate Company Ltd.
11, 5080 12A St. SE, Calgary, Alberta
P: 403-874-6143
F: 403-476-5467

Friday, May 14, 2010 - BMO Fraud





RECA Continues To Be Proactive Against Mortgage Fraud

         Additional Information

Due to the recent Bank of Montreal (BMO) Mortgage Fraud case, RECA is issuing this formal position statement to all Industry Members.

Formal Position Statement

The Real Estate Council of Alberta (RECA) sets and enforces standards of conduct for industry members in the real estate brokerage, mortgage brokerage and real estate appraisal industry.

RECA supports BMO’s legal action and the initiation of a criminal investigation by the police. Where it can be established criminal activity has occurred, RECA encourages law enforcement agencies to pursue criminal charges against the perpetrators of mortgage fraud.

We are reviewing the BMO statement of claim as it relates to our industry. While RECA does not regulate criminal matters, we will review the conduct of industry members named in the law suit as it relates to our own legislation – the Real Estate Act of Alberta. RECA will follow due process in carrying out its investigation and enforcement responsibilities.

In light of the scale of this problem across Canada, and to protect consumer interests, RECA encourages all levels of government to provide additional funding to police agencies to facilitate effective mortgage fraud investigations. RECA also encourages financial institutions to institute real estate appraisals conducted by qualified, licenced appraisers, as part of the mortgage transaction.

RECA Strategies to Address the Issue of Mortgage Fraud within the Industry

RECA has been proactive in dealing with this issue for more than a decade. RECA’s strategies and initiatives related to the issue of mortgage fraud within the industry include the following:

  • In 2000, RECA began an investigative process that brought a number of mortgage fraud schemes to light and identified the involvement by industry members. Data gathered by RECA over a year’s time indicated there was a significant problem.
  • RECA approached the provincial government in 2001 resulting in the assignment of this issue to the Alberta Government’s Law of Property Expert Panel.
  • This Panel suggested nine strategies to combat mortgage fraud and these recommendations gave rise to the formation of the Alberta Government’s Advisory Committee on Mortgage Fraud.
  • In 2002, RECA commenced over 228 investigations. This amount of work facilitated the development of a more comprehensive enforcement strategy within RECA.
  • In 2003, RECA worked with the Alberta Real Estate Association (AREA) to develop a mandatory Mortgage Fraud Awareness course. Industry members in the real estate brokerage, property management, mortgage brokerage and real estate appraisal sectors received mandatory education in this area.
  • In September 2004, the Real Estate Act Rules specific to mortgage brokers were changed to require brokerages to disclose to lenders whether the information supplied has been verified.
  • RECA published Mortgage Fraud Red Flags to assist industry members in the identification of mortgage fraud.  This information bulletin outlined indicators often present in fraudulent transactions. It has been distributed at brokerage office meetings and presentations, posted on, and reinforced in the mandatory course, the compliance audit program, and articles in the Regulator.
  • In 2005-2007 RECA initiated, coordinated and chaired an Industry Mortgage Fraud Task Group to enhance communication among industry stakeholders and develop strategies to reduce mortgage fraud. This industry group included representatives from industry and professional regulators i.e. RECA and Law Society of Alberta, police, lenders, mortgage brokers, appraisers, Realtors, Teranet and mortgage insurers.
  • RECA prepared a How to Investigate a Mortgage Fraud seminar that was attended by all Calgary Police Service commercial crime detectives in 2005.
  • RECA produced a 3-part article on Mortgage Fraud in a 2005 Regulator edition.
  • The information gathered by RECA and its experience with the issue was presented to the Alberta Government. This was instrumental in persuading the Alberta Government to make changes to the Real Estate Act of Alberta in 2006. The mandate of RECA was amended to include: “to protect against, investigate, detect and suppress mortgage fraud as it relates to the industry’. Other changes to the Act improved RECA’s capability to conduct effective investigations and deal with the misconduct of industry members.
  • RECA has dedicated investigators and resources to combat mortgage fraud and has developed strategies to accelerate the gathering of information, confront the industry member and involve the broker.
  • RECA has notified law enforcement agencies of cases where RECA industry members are involved in mortgage fraud. Copies of the investigation file are available to police to initiate criminal investigations. RECA encourages the police to pursue criminal prosecutions in such cases.
  • RECA investigators have met on a regular basis with bank security representatives and law enforcement officials to discuss mortgage fraud and related issues.
  • RECA has made presentations on the topic of mortgage fraud to real estate brokerage offices, industry associations, boards and law enforcement officials.
  • RECA participates in the ARELLO database to share information about licencees with other regulatory jurisdictions.
  • In conjunction with Service Alberta, RECA has created a Tip Sheet to alert the public to ways they might be inadvertently drawn into mortgage fraud schemes.  The publication discusses the role of straw buyers, flipping property, the low down on down payments, and other red flags.
posted in News at Fri, 14 May 2010 17:56:51 +0000

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