PLEASE NOTE: This article was published on the date listed below and may now contain information that has since been updated or changed. We have retained this article as it may still contain helpful comments. However, we advise you to make an appointment to see us for the most up to date information on this topic.

September 2006

Beware of House Finance Fraud

A house finance fraud is one that involves the provision of false or misleading information to a homeowner, bank or other lending institution for financial gain. These frauds appear to be on the rise in New Zealand and they are becoming increasingly elaborate.

Who Is At Risk?

Those at risk include the following:

  • Individuals who wish to own their own home, but either do not have enough money for a deposit or have a poor credit history and therefore find it difficult to obtain a loan;
  • Homeowners struggling with mortgage repayments and other debts;
  • Purchasers of investment properties or parents wishing to assist family members to purchase a home;
  • Banks and other lending institutions.

Types Of Housing Finance Fraud

There are many types of housing frauds, including:

  • Using a questionable valuation and an inflated sale price to mislead the Bank into lending more than it prudently should (based on the real value of the property);
  • Inflating the amount of the cash contribution by not disclosing that some or all of the cash has been borrowed;
  • Homeowners being tricked into transferring their home to a fraudster, believing that the fraudster is obtaining finance on their behalf;
  • A fraudster falsely assuming the homeowner’s identity to sell or mortgage the homeowner’s house without their knowledge.

The Penalty

If the homeowner/borrower is aware of the fraud then they and the promoter of the scheme may be convicted of fraud that carries with it the possibility of a jail sentence. A real estate agent found to be involved in a fraudulent scheme (by providing a false sale and purchase agreement) risks cancellation of his or her licence.

Don’t Forget

To avoid becoming a victim of a fraud and risking the loss of your home, you should bear in mind the following:

  • Never sign any document unless you fully understand it.
  • Read all documents and ask questions if you are not sure.
  • Never be persuaded to include false information on any loan application, regardless of time pressures.
  • Never leave any signature lines blank.
  • Before signing a loan agreement, check the monthly repayments are not higher than you had expected.
  • Seek our advice first.