Real Estate Council of Alberta Fundamentals Practice Exam

What is an example of false documentation in mortgage fraud?

1. Loans intended for investment purposes are treated as primary residences

2. Documents altered to improve the borrower’s appeal for a mortgage

3. Changing the property's zoning classification without disclosure

4. Falsifying repair receipts to qualify for renovation loans

The correct answer is: Documents altered to improve the borrower’s appeal for a mortgage

The correct choice highlights a critical aspect of mortgage fraud, where documents are altered to enhance the likelihood of mortgage approval for a borrower. In this context, altering documents is directly connected to misrepresenting a borrower's financial status or qualifications, which can mislead lenders and result in fraudulent approvals. When documents are altered, they may include income statements, tax returns, or other financial disclosures that are pivotal in the loan evaluation process. The intention behind such actions is to present a more favorable scenario to the lender than what actually exists, thereby increasing the chances of obtaining a mortgage loan under false pretenses. This manipulation can have severe legal consequences and undermine the integrity of the lending process. The other options, while related to potential fraud considerations, do not represent direct alterations of documentation. For instance, treating investment loans as primary residences involves a misclassification of the property’s intended use, yet it does not inherently involve a manipulation of documents. Similarly, changing zoning classification usually pertains to property conditions rather than document falsification, and falsifying repair receipts focuses on the misrepresentation of property condition rather than the borrowing capacity or financial status directly through documentation.