Fraud on primary housing market: mortgage

Financing of the construction with the help of mortgages became more popular after a series of bonds of trust defaults. Developers are increasingly refusing to use bonds in favor of mortgage or prefer to finance construction process throug other ways, including the use of mortgage. Read more about important terms you must know before obtaining a mortgage.

In fact, mortgage is one of the types of securities that bind the developer to perform the basic contract or, in a case of failure to return the value of mortgage. In other words, mortgage is not the ownership of apartment to be constructed or investment in construction. Buyer cannot control the course of construction or call the developer to provide the documents authorizing the construction of the house. Mortgage can be compared with the preliminary contract of sale, and often when buying a mortgage, preliminary contract of sale should be concluded.

Another issue is the recovery of lost mortgage. Chattel mortgage is issued on the registered letterhead, so the mechanism to restore a document in case of loss remains underdeveloped as well as mortgage transfer mechanism from one owner to another. Therefore, it is almost impossible to recover, sell or transfer the ownership of mortgage to another owner. If the developer decides not to comply with the obligations to clients (not to conclude the main contract of sale and not to transfer new apartment to the buyer), or decides not to complete construction and commission of the house, he only needs to return the money you have initially paid for the mortgage and it is completely legal. As a result of above mentioned, fraud examination experts advise generally avoid financing mortgage schemes when buying an apartment in a newly built house and choose the constructor that uses other funding schemes.

In order to avoid fraud transactions you should consult with experienced lawyers and accountants, who will look into details of the contract and give you advice on transaction reasonability.

The information is provided by Rose Silva for Wrenchbusinesssolutions fraud examination experts from Toronto.

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