Real Estate Council of Alberta Fundamentals Practice Exam

What is mortgage assumption in the context of real estate fraud?

1. Taking over a loan without changing the property's ownership

2. Fraudulently altering the original loan amount

3. Assuming the property's current value is higher than it is

4. Using deceptive practices to secure a new mortgage

The correct answer is: Taking over a loan without changing the property's ownership

Mortgage assumption refers to the process where a buyer takes over the seller's existing mortgage and its payments instead of obtaining a new loan. This typically means that the buyer assumes the responsibility for the mortgage debt without formally changing ownership of the property, often done to facilitate a sale or transfer. In the context of real estate fraud, this can become an issue if it is done deceitfully, such as when the parties involved misrepresent the financial condition of the mortgage or the property itself. When mortgage assumption occurs without the lender's consent or involves misinformation about the borrower’s qualifications or the state of the property, it raises red flags for potential fraud. Understanding this concept is crucial, as it highlights the importance of transparency and truthfulness in real estate transactions. The other options suggest various fraudulent activities, such as altering loan amounts, misrepresenting property values, or using deceptive practices for new mortgages. However, these concepts do not accurately describe the specific process of mortgage assumption itself.