Low interest rates, high employment and plenty of great product for sale are spurring an Alberta real estate market that's expected to lead the nation in 2005.

That's great news for the economy. But it also raises a number of red flags for industry insiders who realize how the opportunity to make a fast buck attracts honest consumers, fresh investment dollars - and criminals - to the market.

Forget all you've heard about marijuana grow-ops being the biggest issue. These days, the Real Estate Council of Alberta (RECA) is zeroing in on mortgage fraud.

It's the crime committed when individuals lie to help themselves or others secure a mortgage or insure a mortgage loan, regardless of whether they intend to pay the mortgage.

David Lazarowych, Business Edge
Calgary realtor Rob Irwin is busy explaining mortgage fraud to his colleagues.

It's also the crime committed when organized criminals buy houses to produce drugs or to flip among their own players at inflated prices, all of it based on borrowed money the criminals don't intend to pay back, says Patrick Keogh, manager of business development for the Canada Mortgage and Housing Corp. (CMHC) Prairie region.

The interesting thing about mortgage fraud is that while the industry acknowledges it's on the rise, numbers are tough to come by, in part because criminals aren't filing reports.

"It's hard to know what you don't know," admits Keogh.

Moreover, most incidents of mortgage fraud involve more than one type of fraud, with identity, employment or income, property, intent to reside or equity fraud being the five main types.

Pat Kelly, president of the Alberta Mortgage Brokers Association (AMBA), says U.S. statistics estimate the deals funded on a fraudulent basis in that country are worth tens of billions of dollars.

The reality of today's hot market is that the opportunity to make money serves as a kind "of a lightning rod for sophisticated criminals," says Kelly.

A strong economy, the pressure for fast deals, Alberta laws that allow assumable mortgages, and federal and provincial privacy laws that complicate sharing personal information (even when criminal activity is suspected) all make the Alberta real estate market an attractive place for fraudsters, admits Keogh.

It's the dark side of the so-called Alberta Advantage, says Calgary realtor Rob Irwin.

These days, Irwin spends a lot of his professional time teaching other Alberta realtors and mortgage agents how to spot mortgage fraud - and what they need to do when they suspect fraud may be obscuring the seller's or vendor's real identity or motives, or when fraud has artificially inflated a home's value.

"Being a realtor is like having all the radio channels on at once," says Irwin. "We're supposed to be writing enforceable contracts" and be acting in the clients' best interests while guiding them through a maze of issues.

Those issues begin with the basics, like finding the right house in the right neighbourhood at the right price.

With issues such as grow-ops and mortgage fraud now part of the real estate environment, however, home inspections and mortgage fraud awareness are increasingly important.

The fraud awareness course taught by Irwin is a mandatory part of RECA's current professional development course list, and he says realtors and mortgage agents are flocking to the program, which must be completed by Sept. 30 this year.

"I think it's been an issue for years," adds Lorraine Northcott. A real estate agent west of Edmonton who also teaches the course, Northcott says the course's mandatory status for licensed realtors and mortgage agents shows the industry's commitment to quality client service.

The real estate industry's concern about increased mortgage fraud is not being translated into criminal investigations, says Robbie Robertson, a detective with the commercial crime unit of the Calgary Police Service (CPS).

By late January, CPS was dealing with two formal complaints of mortgage fraud - a number Robertson says is too low.

Training realtors and mortgage agents to spot mortgage fraud helps, as does pursuing professional sanctions by bodies such as RECA.

But Robertson worries some lenders view mortgage fraud as a "cost of doing business" and don't pursue the matter in court.

Houses used for marijuana grow operations, for example, are costly to renovate and repair, but it can be done without filing a complaint of mortgage fraud against those who bought the property, says Robertson.

He says it's time society recognizes mortgage fraud is not the kind of crime committed by individuals acting alone, and that the financial cost of the illegal activity is shared by the larger society.

The CPS, he adds, is "not prepared to handle the volume of complaints that would come in" if incidents of mortgage fraud were pursued through the legal system.

SPOT THE RED FLAGS Mortgage fraud could be at work when:

* You are offered a fee to use your name and credit information to obtain a mortgage.

* You are encouraged to include false information on a loan application.

* You are asked to leave signature lines or other important areas of a loan application blank.

* The amount of the mortgage is higher than the value of the property.

* The mortgage has gone through a series of refinancing and in each instance the amount of the mortgage has increased.

Source: The Real Estate Council of Alberta

(Joy Gregory can be reached at joy@businessedge.ca)