New Private Lending Rules, And How We're Protecting Against Fraud
In the world of real estate, fraud is always a serious concern. Real estate transactions deal with significant amounts of cash that change hands in large increments in a relatively short amount of time. There will always be wrongdoers who attempt to fraud the system, and it is regularly up to lawyers to put safeguards in place to catch fraudsters in their tracks and prevent those frauds from occurring.
When it comes to private lending, that risk is amplified. Private lenders work outside the traditional structure of bankers and large-scale financial institutions. This can be beneficial for borrowers who struggle to obtain a loan through traditional means, and lucrative for lenders as well. Yet this arena is also a choice hideout for fraudsters, who often believe that they can play the system in order to avoid getting caught.
There has been significant media coverage in the last few months of brazen examples of real estate fraud, both from fraudulent parties and even from unreputable lawyers. Incidents of frauds such as these ones have become such a concern that title insurers have re-examined their policies for insuring private mortgages.
In response to the increasing risk, some insurers have limited the size of the private mortgage they will insure or the amount of private mortgages they will allow on one property, and others have instituted more sophisticated identification verification systems. Most, if not all insurers have increased scrutiny of private transactions, which has resulted in significantly slower approval times.
At Sari Rose Law, we understand the importance of implementing various safeguards for each transaction. We meet with our clients, either in person or virtually, and take the required steps to confirm their identity. We monitor funds closely, and will inquire as to why they are needed, in order to make sure that they are going exactly where they need to, and not inexplicably to a third-party.
If the borrowers are elderly, or a power of attorney is used, we’ll be alert for signs of elder or identity fraud. We watch carefully for signs of potential money laundering, or other unusual activity that may alert to something sinister going on behind the scenes.
Our message is clear: we are experienced lending lawyers who bring our instincts with us into every deal. If something feels ‘off,’ or out of the ordinary, we’ll investigate further to ensure that we’re not taking part in any sort of fraudulent transaction no matter how much money is at stake. No price tag (or no bill from our firm) is worth needlessly sacrificing our reputation.
If you have any concerns about potential fraud involving your transaction, we would be happy to discuss further. Contact us today to learn more about our practice, and the measures that we’re taking to protect our clients.