The jump in interest rates to their highest levels in decades has led to a significant increase in mortgage fraud, according to banks and regulators.
Since the cost of borrowing began rising two years ago, a growing number of people in the US and UK have lost money to sellers who promise below-market interest rates in exchange for an upfront fee, but disappear when it's time to close the bank. lend.
Lloyds Bank says the number of so-called advance fee scams reported by its customers rose 19 percent last year, after rising 83 percent in 2022. In the United States, according to Federal Trade Commission figures, there were nearly 26,000 cases. Cases of advance-fee loan abuse were reported last year, costing victims nearly $75 million. That was less than the 2022 peak of $99 million, but still far more than victims lost on such speculation before interest rates started rising two years ago.
The French Authority for Supervision and Precautionary Decisions also warned of the increase in credit fraud that offers very low interest rates on loans.
“There's a lot of data that shows advance fee fraud is on the rise,” said Jason Zirkle, director of training for the Association of Certified Fraud Examiners.
Zirkle said it's illegal in the U.S. to take application fees if you're not a licensed lender, and most don't get involved in advance fee scams.
“It's kind of amazing how little they have to do to get people to send them their money,” he added.
When Angela, a nurse who lives in Wisconsin, went looking for a new mortgage last spring, her timing couldn't have been worse. Mortgage rates were at 7.5 per cent, the highest level in 10 years and more than double the 3.25 per cent interest that Angela, who asked the Financial Times not to use her last name, was paying on the loan on her house, which she was furnishing. For sale.
She found what seemed like a good deal: a loan from BetterMed, a Toronto-based financial company that said it catered to medical professionals and offered loans at zero per cent interest rates.
BetterMed requires an upfront application fee of $15,500. But Angela said a BetterMed loan officer told her the fee would be applied to her mortgage costs once she was approved, which she claimed was the case for almost all applications.
“I should have known better than to transfer the money,” Angela said.
For months, she was told the loan was being processed until a notice arrived this year informing her that her application had been denied, without explanation. She has since registered complaints with the Better Business Bureau and contacted an attorney.
“They already knew my credit score when I called, so it seemed legitimate,” Angela said.
“It's very disappointing that this happened, because it seemed like a really great deal.”
BetterMed could not be reached for comment. The company's phone number, which was recently removed from its website, is no longer active. The company did not return multiple emails and messages from the Financial Times.
BetterMed's website lists two company locations, a headquarters in Toronto and another in New York, near Times Square. But security guards at both locations said there was no company by that name in those buildings.
In Canada and the United States, lenders and mortgage brokers are required to obtain a license from local financial authorities. But BetterMed is not on the list of lenders or mortgage brokers licensed in the province of Ontario. The New York Department of Financial Services also has no registration for BetterMed.
BetterMed's website says the company offers “the world's lowest interest rate: 0% for 30 years,” as well as a “100% approval program for selected applicants.” The application fee can be as high as $10,500, but “every cent” of the application fee “is deducted from the total amount you pay,” she says.
But under the “Terms of Service” section of its website, BetterMed states that the company is not a lender and that it “makes no express or implied warranty that you will be approved for a loan.” Their refund policy states: “No Refunds.”
In a February post on the self-publishing site Medium, BetterMed touts its many success stories, including one from Spiro K, who gives the company five stars. “Everything was documented and I got 30 years to pay it back. The savings were amazing,” Spiro wrote. The company’s website also has three videos from seemingly satisfied customers.
Elsewhere, BetterMed reviews have been less positive. There are complaints on Reddit about the company going back three years, many claiming they paid the company $1,000 or more and never got a loan.
Ontario's Better Business Bureau gives BetterMed an “F” rating, saying it has received 12 complaints about the company in three years, 10 of which were never resolved.
Matthew Graham, a mortgage rates expert at industry website Mortgage News Daily, said that while some lenders offer below-average rates, often in combination with some higher upfront costs, “it is literally impossible to have a 0% mortgage without some conditions.” “Very important.” attached”.
Graham said the language BetterMed uses to describe its loans raises red flags. “The site also ignores many common-sense questions that need to be answered before a smart borrower will give it the time of day,” Graham said. “Very suspicious at first glance.”
Louise Baxter, a consumer protection expert and founder of the UK's Trading Standards National Fraud Team, said high interest rates and other economic factors currently favor fraudsters.
“People are not vulnerable. It's the situation or the market that makes them vulnerable,” Baxter said. “With mortgages and loans there is increased vulnerability in that area because of the cost of living crisis and rising interest rates and all these things.”
